[UrmaBlume]

Here is a beautiful double positive divergence between price and V94Window and Net New Trade in ES that happened about 20 minutes ago and worth over 10 points in less than 30 minutes. Times are PST.

Price/Trade divergences are almost always clearer and more reliable than price/price divergences.

Originally Posted by UrmaBlume »

Below is copyrighted text taken from "Practical Short Term Trading - Techniques & Technologies" that is reproduced here with permission from the author.

Three True Descriptions of the

Price/Time/Volume Continuum are:

"As Price changes or not and Time passes Volume happens/accumulates.

As Time passes and Trade/Volume happens Prices change in Direct Proportion to the degree to which that Trade is Imbalanced.

As Time passes and Trade/Volume happens Prices change in Inverse Proportion to the degree to which that Trade is Balanced."

cheers

UrmaBlume

[UrmaBlume]

There is a pattern that is often seen on significant local and session extremes. That pattern has 3 parts from 2 charts. First there is a strong spike in the velocity of commercial trade (the drivers of the move) and on that same chat is a divergence between price and order flow. Next there is confirmation of the first chart by that same divergence between price and order flow in a higher time frame.

The low at 0507 PST today showed just such characteristics and was good for 30+ points in ES.

The first chart down shows the spike in the velocity of commercial trade accompanied by a positive divergence between price and order flow. The sceond chart confirms the first with a positive divergence between price and order flow. The third chart shows the long continuation lows in order flow as price continued to rise.

This same pattern is seen on many local and session extremes and point to the power of noting divergence between price and order flow.

The Spike and Positive Divergence:

Please Click to enlarge image

The Confirming Divergence from a higher time frame

Please Click to enlarge image

The Long Continuation Lows in Order Flow

Please Click to enlarge image

cheers

UrmaBlume

[bh_trade]

By playing with inputs and #shares/bar anyone could re-create the same divergence trades using a simple macd.

My point: sure would be nice to see one of these posts just once without the benefit of hindsight.

Originally Posted by UrmaBlume »

There is a pattern that is often seen on significant local and session extremes. That pattern has 3 parts from 2 charts. First there is a strong spike in the velocity of commercial trade (the drivers of the move) and on that same chat is a divergence between price and order flow. Next there is confirmation of the first chart by that same divergence between price and order flow in a higher time frame.

The low at 0507 PST today showed just such characteristics and was good for 30+ points in ES.

The first chart down shows the spike in the velocity of commercial trade accompanied by a positive divergence between price and order flow. The sceond chart confirms the first with a positive divergence between price and order flow. The third chart shows the long continuation lows in order flow as price continued to rise.

This same pattern is seen on many local and session extremes and point to the power of noting divergence between price and order flow.

The Spike and Positive Divergence:

Please Click to enlarge image

The Confirming Divergence from a higher time frame

Please Click to enlarge image

The Long Continuation Lows in Order Flow

Please Click to enlarge image

cheers

UrmaBlume

[UrmaBlume]

Originally Posted by bh_trade »

By playing with inputs and #shares/bar anyone could re-create the same divergence trades using a simple macd.My point: sure would be nice to see one of these posts just once without the benefit of hindsight.

The point is that MACD is still price and not as reliable as order flow when using divergences and more important than that is that no MACD will ever detect the spikes in the velocity of commercial trade.

Whether it is after the fact is not as important as the fact that it is there on most days. The value is that it is a pattern that so often repeats itself on local extremes. It means that when you see a faster time frame with a spike and divergence and that is confirmed by divergence in a higher time frame then there is an increased chance that what you are looking at is a session or local extreme.

cheers

UrmaBlume

[UrmaBlume]

A pattern of divergence between price and order flow based indicators is often present on session extremes.

Today, 10/06, the best trade of the day was a buy on the session low. The session low was perfectly indicated by the positive divergence between price and indicator V94Window as shown in the attached pic.

As more and more of these signals are posted one cannot help but notice both how alike they are and how often they repeat themselves at points of opporutnity.

Please click to enlarge image

The V94Window that reflects this positive divergence is described in this TL post.