[brownsfan019]

1) Divergences work very well in non-trending markets

2) Divergences do not work in trending markets

So IMO the key is seeing if you can distinguish if we are trending or not.

[chulaihuey]

BrownsFan, Very interesting. I have always thought of divergence trading in terms of trend. In fact, my definitions of trading divergence are:
Given what you are saying I may want to consider redefining. Instead of "Trend Reversal", maybe "Price Reversal", and instead of "downtrend end" something like "look for bullish price move". I see a possible example, based on my SMA(40) going flat in the attached EUR/USD chart. Let me know if I understand correctly. Thanks.

[brownsfan019]

Find a trending market, test your divergences out. If your method produces winners in a trending move, then you have designed your method in a trend friendly way. If a directional move occurs and your divergences are constantly shorting highs or buying lows, then you have a range market divergence system.

[UrmaBlume]

Divergences between price action and certain indicators can, indeed, be very useful in almost any market in almost any time frame.

The issue that costs most traders is that they trade from divergences between price action and the action in a price based indicator such as stochastic or RSI.

A much more effective approach is to look for divergences between price action and actual buying and selling volumes/order flow.

Below is a perfect example from today's action in ES showing a topping spike in the velocity of commercial trade and obvious negative divergence between price and a moving window of order flow we call the V94Window.

This trade started 40 minutes ago and so far is good for 20+ points. The date is today 09/09 and the times on the chart are PST.

Please Click to enlarge image

Cheers

UrmaBlume

[kuokam]

There is a RSI bearish divergence on the eur/chf pair. Maybe the pair is about to to ride all the way back down to where it came from.
Unfortunately I could not upload my chart

[chulaihuey]

Kuokam, Since I am still trying to learn how to "see" divergence I uploaded the EUR/CHF 15 minute, marked with what I think is the divergence indication. Do you agree with how I marked it? Thanks.

[chulaihuey]

UrmaBlume, Very impressive tradestation setup. I personally do not use it, but have heard good things about it. Once I can prove I can make (or at least not lose) $ on my free platforms I would like to try it. Are those indicators standard with the TS Platform or add-on extras?
I did take a look at my stochastic versus price for the same period of the ES (used 1 minute chart) and I see a divergence as well. I am on EDT. Attached chart... Thanks for the info.

[kuokam]

Originally Posted by chulaihuey »

Kuokam, Since I am still trying to learn how to "see" divergence I uploaded the EUR/CHF 15 minute, marked with what I think is the divergence indication. Do you agree with how I marked it? Thanks.

Perfect for me my friend Chulai, although the chart I still can't post is a daily. You see, I am a learner just like you, and divergence isn't actually the tool I use every day. In my opinion, divergence is one of the easiest things to spot: you just have to draw 2 lines and see if they diverge. And now put it all in context and time your entry. I believe you know the regular and the hidden divergences.
I was lucky enough to be on the right side with EUR/CHF this week. But problem is this is not a "normal" rally, as it was sparked by a decision the SNB that the pair should trade at 1.20. Will it continue up or will it fall back like the yen a couple of weeks ago? I am out since yesterday anyway, now waiting for London open to see how it fares aroud the fatidic 1.20.