Trading Divergence

[professor_frink]

Re: Reversal Swing Convergence Divergence

just curious what the first and 3rd stock codes are tech?

 

[tech/a]

Re: Reversal Swing Convergence Divergence

just curious what the first and 3rd stock codes are tech?

1st
MAH
2nd
RIO
3rd
NAB

Dates are in the top left of the chart.(Last date shown on the chart).
This stochastic V MACD is an interesting arguement.
That converging and diverging M/As of a closing price have more meaning than the current close relative to the highest high and lowest low of x time periods.

It is argued 1 shows momentum graphically better than the other????

Wow---really
Click to expand.

 

[Frank D]

Re: Reversal Swing Convergence Divergence

You don’t need those indicators to know which one is likely to fail or
which one is likely to succeed. You just need an understanding of the
price action in relation to the Quarterly cycles.

NAB:- Already trading around the Quarterly highs in April (resistance)

RIO:- Already trading around the monthly 50% level in February (support) with a bias to rise towards the Quarterly highs in April (resistance)

MAH:- already trading around the October highs (resistance) with a rotation pattern down into the monthly 50% levels.


Those indicators are a waste of time if you don't optimise the price
action with the Primary and Secondary cycles:- support & resistance

 

[brty]

Re: Reversal Swing Convergence Divergence

There are some gems in this thread, and not necessarily in just the realm of divergence.

From TechA,

Mind you I am asking everyone to confront everything they see and read on forums as the larger majority of it is without substance or substantiation.

Absolutely agree 100%, yet many do not. Also the opposite is also true of many in that they think information on the net posted for free is useless, yet sometimes it is extremely valuable, but obviously always check.

BBand,

I test all my strategies MANUALLY!!

So do I, you get to see where and why something does or does not work, whereas a computer printout of a strategy does not give you this advantage.

Now, on to the topic.
I tend to agree with Tech about the uselessness of divergence by itself. Personally I do not use it. However on the 3 charts presented by knowing when the divergence is not working, as in chart 3 can get you out of a poor situation. With the failure MAH, my take is that after the trade was not working as planned, one should exit the position. As this was going sideways, there would have been no loss by exiting after 8-10 days of sideways action. Letting the market prove you are correct rather than waiting for the market to prove you incorrect is how I would play it.

With my own style of trading, I could have bought MAH when it first went down to ~63c, before the divergence showed itself. The sideways movement that brought out the divergence on indicators would have had me wary, and I would have exited after a couple of more days for a flat trade.

brty

 

[It's Snake Pliskin]

Re: Reversal Swing Convergence Divergence

Crazy arguement.

The Charts show a positive result!!!
Here is MACD pretty close to the same.

Give me evidence that one form of divergence out performs another.

Then show me where ANY form of divergence as a foundation indicator consistently out performs the mean of the index.

Add whatever filtering system additional indicator you like---but show me---if its that obvious then it shouldnt be that hard.

Infact give me a list of conditions to be met and I'll find 20 charts that fit the criteria---post them up and see how they go.

So just bullet point the conditions and variables.
EG
. MACD
.Rising volume
Whatever you tell me.(meaning anyone who wishes to contribute)

I'll go to all the effort and if it out performs the index then I'll even send Joe $500---so I'll do all the work and take all the risk-----

Charts using MACD (Same ones)

So Tech, would say a divergence of the stochastic is the same as a divergence of OBV for example?

Also, why are you focussing on being right? And at what point are you considering a divergence signal a failure after what time frame?

Could you please stop asking everyone to take a $500 challenge it is disrespectful.

 

[tech/a]

Re: Reversal Swing Convergence Divergence

So Tech, would say a divergence of the stochastic is the same as a divergence of OBV for example?

It doesnt matter what the divergence is from what oscillator,relative to price action. longterm result is the same---no edge.

Also, why are you focussing on being right? And at what point are you considering a divergence signal a failure after what time frame?

(A) Ive not seen any concrete evidence to the contrary.Pete says he can do well from it ---fine---but if I or You or anyone out there were to place $1K to 100K on a divergence trade youd be wanting more than here say---hmm perhaps not!
(b) Failure is an equity curve which is underwater.As we havent discussed exits or exact point of entry its a rather mute point.

Could you please stop asking everyone to take a $500 challenge it is disrespectful.

Ok.
Thought I had.

Now Ive offered Joe $500 if Divergence can be shown to supply an edge to the trader.
From Challenge to Donation.Is that acceptable?

Mind you the response has been underwhelming.

 

[It's Snake Pliskin]

Re: Reversal Swing Convergence Divergence

It doesnt matter what the divergence is from what oscillator,relative to price action. longterm result is the same---no edge.

(A) Ive not seen any concrete evidence to the contrary.Pete says he can do well from it ---fine---but if I or You or anyone out there were to place $1K to 100K on a divergence trade youd be wanting more than here say---hmm perhaps not!
(b) Failure is an equity curve which is underwater.As we havent discussed exits or exact point of entry its a rather mute point.

Ok.
Thought I had.

Now Ive offered Joe $500 if Divergence can be shown to supply an edge to the trader.
From Challenge to Donation.Is that acceptable?

Mind you the response has been underwhelming.

Tech I think you are missing the point that the way a divergence is traded is not the same for all people. And each indicator is different. Considering a divergence is a warning what is the issue that sees you so stridently opposed to them? No-one has made any claims that they work all the time nor given reasons for that, nor talked about exits and exact entries etc. Without this info you don't have much to be critical about unless you would like to give specific examples from your own trading.

If you want to donate to Joe I am sure he would be happy with it.

 

[wayneL]

Re: Reversal Swing Convergence Divergence

Crazy arguement.

The Charts show a positive result!!!
Here is MACD pretty close to the same.

Give me evidence that one form of divergence out performs another.

Then show me where ANY form of divergence as a foundation indicator consistently out performs the mean of the index.

Add whatever filtering system additional indicator you like---but show me---if its that obvious then it shouldnt be that hard.

Tech,

You might have missed where I said I don't use divergence and I also doubt they give the trader any edge.

However, if we are discussing them, we might as well get the parameters right.

I maintain that stochastic osc is the wrong indicator to use for the logic and reasons already stated, whether or not the signals generated are similar some of the time.

There is nothing crazy about that.

 

[Columbo]

Re: Reversal Swing Convergence Divergence

Tech,

You might have missed where I said I don't use divergence and I also doubt they give the trader any edge.

However, if we are discussing them, we might as well get the parameters right.

I maintain that stochastic osc is the wrong indicator to use for the logic and reasons already stated, whether or not the signals generated are similar some of the time.

There is nothing crazy about that.

If one searches the internet or book stores there is plenty of EXPERTS who
promise the world with colourful lines and histograms.All you need is some cash and it's the path to riches.

Firstly if anyone had some magic method that was a cash cow why share it
for others to spoil the party.T/A in my opinion is not worth a cent, it promises the world and delivers nothing.Maybe when it first hit the scene it may have been worth while but every man and his dog leans on it now so it's edge is gone.All the lines ect tell you is what has happened and are no guarentee of future direction.To have long term success in this game you need an approach that is different to the norm.It's no different to life, the sucessful are different the average are just that.

 

[tech/a]

Re: Reversal Swing Convergence Divergence

Tech I think you are missing the point that the way a divergence is traded is not the same for all people. And each indicator is different.

When it comes to oscillators who's components are either
Open,close,high,low,even range I don't know about that (---see below in answer to Wayne.).

Considering a divergence is a warning what is the issue that sees you so stridently opposed to them?

If I was going sailing and wanted a strong wind forecast I would want better reliability than Divergence.

No-one has made any claims that they work all the time nor given reasons for that, nor talked about exits and exact entries etc. Without this info you don't have much to be critical about unless you would like to give specific examples from your own trading.

How many do you want I made a point on 3 charts not one correct.
I keep harping on about application (Theory without application remains theory) and all we get is theory.I have run many many tests on divergence and cant find 1 that returns a profit in fact I cant find 1 that doesn't wipe out the starting capital over an extended period. Ive even offered to run an exercise over 230 charts with the parameters selected by the populace.
Not 1 reply

I'm truly Underwhelmed!

If you want to donate to Joe I am sure he would be happy with it.

I'm sure he would be pleased.

Tech,

You might have missed where I said I don't use divergence and I also doubt they give the trader any edge.

OK

However, if we are discussing them, we might as well get the parameters right.

I maintain that stochastic osc is the wrong indicator to use for the logic and reasons already stated, whether or not the signals generated are similar some of the time.

There is nothing crazy about that.

Well I don't know about that.

%K = 100[(C - L14)/(H14 - L14)]

C = the most recent closing price
L14 = the low of the 14 previous trading sessions
H14 = the highest price traded during the same 14-day period.

%D = 3-period moving average of %K

So if the stochastic is rising then the closing price is either the highest price for 14 periods or moving toward it.

If an M/A is rising or crossing a slower M/A it to(The close) is moving higher.
How is one superior to the other?

More to the point why is one WRONG relative to momentum??

 

[professor_frink]

Re: Reversal Swing Convergence Divergence

Tech, I can't really help you in regards to trying to come up with a set of coded rules for trading divergence, as I've never really been someone that trades with it much. I do use the McClellan oscillator a little bit, only to the long side and only as 1 of a number of filters. Personally think it'd test out horribly in isolation. What I am interested in is the how and why of the prior tests you've run.

Maybe if people can see some tested results and have a little look "under the hood" of any test that shows divergence to be useless, then it may at least shed some light on how not to use it, which is still quite useful information to have

 

[tech/a]

Re: Reversal Swing Convergence Divergence

Tech, I can't really help you in regards to trying to come up with a set of coded rules for trading divergence, as I've never really been someone that trades with it much. I do use the McClellan oscillator a little bit, only to the long side and only as 1 of a number of filters. Personally think it'd test out horribly in isolation. What I am interested in is the how and why of the prior tests you've run.

Maybe if people can see some tested results and have a little look "under the hood" of any test that shows divergence to be useless, then it may at least shed some light on how not to use it, which is still quite useful information to have

So you'd like the formula for testing divergence and any other variable I choose to use.
Perhaps youd like me to just simply run sims on anything people cough up rather than the 20 charts suggested.

OK
Ill play
Give me the conditions and I'll do both!
But give me the conditions!!!
Unbelieveable.
I'm asking people to THINK-----do due diligence and you want me to do all the work.

Hey if you think (meaning anyone out there) you can consistently out perform the index trading divergence (any divergence) then all wealth and riches to you.

Why bother I'll just let people absorb un substantiated theory and BUTT out!

Now those conditions are???

 

[professor_frink]

Re: Reversal Swing Convergence Divergence

So you'd like the formula for testing divergence and any other variable I choose to use.
Perhaps youd like me to just simply run sims on anything people cough up rather than the 20 charts suggested.

OK
Ill play
Give me the conditions and I'll do both!
But give me the conditions!!!
Unbelieveable.
I'm asking people to THINK-----do due diligence and you want me to do all the work.

Hey if you think (meaning anyone out there) you can consistently out perform the index trading divergence (any divergence) then all wealth and riches to you.

Why bother I'll just let people absorb un substantiated theory and BUTT out!

Now those conditions are???

I wasn't asking for the entire formula. Sorry to have offended you. Personally I don't have any interest in spending hours pouring over charts to come up with some kind of idea on exactly what conditions I'd like to see tested. If I had that level of interest I'd have tested it out myself.

I had just assumed that when you said you had tested it over many different exchanges that you'd have results and a general overview of the idea available to show people.

I'll leave you to it.

 

[ginar]

Re: Reversal Swing Convergence Divergence

You don’t need those indicators to know which one is likely to fail or
which one is likely to succeed. You just need an understanding of the
price action in relation to the Quarterly cycles.

NAB:- Already trading around the Quarterly highs in April (resistance)

RIO:- Already trading around the monthly 50% level in February (support) with a bias to rise towards the Quarterly highs in April (resistance)

MAH:- already trading around the October highs (resistance) with a rotation pattern down into the monthly 50% levels.


Those indicators are a waste of time if you don't optimise the price
action with the Primary and Secondary cycles:- support & resistance

No arguements from me frank . just like to add the optomisation of indicator inputs to get a useable flowing set of exit and entry points is only evident in hindsight . This is why i think indicators in the main are redundant , in reality there is only price and time on a chart , i think it pays to concentrate on that in isolation instead of looking at twisted variations of price and time . Im sure you can learn something from elephants foot prints but if im studying elephants i want to be looking at elephants

 

[Columbo]

Re: Reversal Swing Convergence Divergence

I wasn't asking for the entire formula. Sorry to have offended you. Personally I don't have any interest in spending hours pouring over charts to come up with some kind of idea on exactly what conditions I'd like to see tested. If I had that level of interest I'd have tested it out myself.

I had just assumed that when you said you had tested it over many different exchanges that you'd have results and a general overview of the idea available to show people.

I'll leave you to it.

I'm not attempting to insult anyone as this is a forum with opinions expressed.

But the very nature of the questions and explainations that go back and forth
it is logical to assume that no one really has a solid method.Why if one had some special indicator(s) would there be a need to question and examine the
other guys golden indicator.The question one needs to ask is do I move from indicator to indicator looking for the holy grail ? The search will never end.

 

[It's Snake Pliskin]

Re: Reversal Swing Convergence Divergence

When it comes to oscillators who's components are either
Open,close,high,low,even range I don't know about that (---see below in answer to Wayne.).

If I was going sailing and wanted a strong wind forecast I would want better reliability than Divergence.

How many do you want I made a point on 3 charts not one correct.
I keep harping on about application (Theory without application remains theory) and all we get is theory.I have run many many tests on divergence and cant find 1 that returns a profit in fact I cant find 1 that doesn't wipe out the starting capital over an extended period. Ive even offered to run an exercise over 230 charts with the parameters selected by the populace.
Not 1 reply

I'm truly Underwhelmed!

I'm sure he would be pleased.

OK

Well I don't know about that.

%K = 100[(C - L14)/(H14 - L14)]

C = the most recent closing price
L14 = the low of the 14 previous trading sessions
H14 = the highest price traded during the same 14-day period.

%D = 3-period moving average of %K

So if the stochastic is rising then the closing price is either the highest price for 14 periods or moving toward it.

If an M/A is rising or crossing a slower M/A it to(The close) is moving higher.
How is one superior to the other?

More to the point why is one WRONG relative to momentum??

I'll leave you to it tech.

 

[professor_frink]

Re: Reversal Swing Convergence Divergence

Thought I'd throw something together to see how well it could be tested. Following code for amibroker will test out long only divergence on the RSI.

Looks for a higher high and higher close after divergence forms, stop 1 point below the lowest point of the move and a profit target twice the initial stop. Code is pretty raw and misses quite a bit of the action, but it could be a good starting point for anyone looking to test out this type of thing, so I thought I'd post it up in it's rather unrefined current state.

Tested it out on the index so the stop level is 1 point below the recent low, it would need to be adjusted if testing on shares. Just change the number in the "stoptrigger" line to adjust

Cheers

a = LLV(RSI(14),20);
b = LLV(L,20);
d = Ref(L ==b AND RSI(14) > a,-1) AND Ref(RSI(14) > a,-2);

Buy = d AND H > Ref(H,-1) AND C > Ref(C,-1);
BuyPrice = C;
Sell = 0;
x = ValueWhen(Buy,LLV(L,20));
y = ValueWhen(Buy,C);
stoptrigger = x - 1;
ApplyStop( stopTypeLoss,stopModePoint,(y - stoptrigger));
target = (y-stoptrigger)*2;
ApplyStop( stopTypeProfit,stopModePoint,target);


PlotShapes(shapeUpArrow * Buy, colorGreen, 0, L, - 10);
Plot(stoptrigger,"stop",colorYellow,styleLine);
Plot((y +target),"profit target",colorBlue,styleLine);

 

[tech/a]

Re: Reversal Swing Convergence Divergence

Ill leave it to you tech

Means?

Prof

Your right it is raw and really doesnt find divergence.
The problem is you need to get around the Zig Zag indicator often needed to define peaks and troughs.Thats why Im guarded about the code.
I paid for it!

here is a metastock code for MACD and RSI which I didnt pay for and maybe handy for those with metastock and interested in investigating further.
To alter to a systems test is a little more work this at least gives you the divergence code.

I also note no further comment re Stochasic v MACD or any other indicator?

 

[professor_frink]

Re: Reversal Swing Convergence Divergence

Means?

Prof

Your right it is raw and really doesnt find divergence.

actually I thought it did a half decent job for something that got banged together in 20minutes

Every signal it spat out seemed ok. Maybe I just don't understand divergence properly, it's not really something I've looked at in great detail before.

Here are the last couple. Seems fine to me.

View attachment 38269

Thanks for that code though. Off to the races today so will most likely be under the weather tomorrow, and maybe monday, will try and come back to this later.

 

[wayneL]

Re: Reversal Swing Convergence Divergence

I also note no further comment re Stochasic v MACD or any other indicator?

It would be an interesting conversation to take this further, if I were interested, but I'm just not interested enough in diversions to bother right now.

Maybe later if I'm sitting in my cave and bored enough.