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Post your favorite Divergence ind. here

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  #1 (permalink)
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I am re-coding Dadof3and3's, beautiful piece of work, D3Spotter to use the indicator's (ind.) data-series as the primary divergence (div.) comparison and price as the secondary div. comparison. First I'm tackling the MACD Histogram, because it's more complex having a zero line crossing to deal with. Then I will work on coding the other ind. that D3spotter has to choose from. My ultimate goal is to have this ind. pass a signal onto a strategy.

What I would like from you guys is to post pictures of your favorite ind. showing a good div. along with a bad div. and explain why on the picture, as I have shown below. From your explanation of bad div. I will code conditional filters to alleviate poor div. patterns

!! Please, I do not want this to be a discussion posting (there are good postings discussing this topic that should be used). Only post Pictures with a brief explanation.

If you need a Screen Capture & Edit util, here's a freeware one... https://www.snapfiles.com/freeware/gmm/fwscreen.html -> PicPick

Thanks, and lets make some money with this.

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  #3 (permalink)
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Hello Zachary! Good topic and one dear to my heart as I've been studying divergence phenomina for over a decade. I've posted two pics...weak divergence set up on the left and good divergence on the right. Briefly, I use a MACD and Price. Price DT's and DB's can be Close, Exact or Greater by any amount. MACD must make the required corresponding higher low/lower high (for long or short).

For good divergence profit potential, Price must be in good "cycling" volatility and the MACD must retrace at least 50% or more (more is better) of it's established range within signal formation. There's a lot more I've discovered but this is simple and it works fairly well.

I also use a modified stoch to re-confirm the divergence but entry is ONLY taken when the MACD makes it's first turn into the new trend direction on the correct color bar (up for long and down color for short). Glad to elaborate if necessary.

Roger

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  #4 (permalink)
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Zachary, if there is anything I can help you with, just let me know. Since I wrote this indicator, the exposure to the world has been phenomenal, and its interest is growing! I’m not much of an experienced trader but I am a programmer. This indicator has been fun to write and I sure would like to see it continue its evolution. You can reach me @ dadof3and3@yahoo.com.

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rogerf View Post
Hello Zachary! Good topic and one dear to my heart as I've been studying divergence phenomina for over a decade. I've posted two pics...weak divergence set up on the left and good divergence on the right. Briefly, I use a MACD and Price. Price DT's and DB's can be Close, Exact or Greater by any amount. MACD must make the required corresponding higher low/lower high (for long or short).

For good divergence profit potential, Price must be in good "cycling" volatility and the MACD must retrace at least 50% or more (more is better) of it's established range within signal formation. There's a lot more I've discovered but this is simple and it works fairly well.

I also use a modified stoch to re-confirm the divergence but entry is ONLY taken when the MACD makes it's first turn into the new trend direction on the correct color bar (up for long and down color for short). Glad to elaborate if necessary.

Roger

If anyone knows divergence its Roger , he lives and breathes it . I havent been in his room in a long time but Im a student of his . He taught me mucho about form and multiple timeframe confirmation not to mention discipline . Form is critical , think 1. price makes a low 2. eager buyers come in and boost price up 3. theres still some weak sellers to extinguish 4. price comes down to that low again 5. serious buyers get in gear and take over - simple lol . Like to hear more from you Roger and hope all is well with you and your crew out in Texas !

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  #6 (permalink)
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rogerf View Post
Hello Zachary! Good topic and one dear to my heart as I've been studying divergence phenomina for over a decade. I've posted two pics...weak divergence set up on the left and good divergence on the right. Briefly, I use a MACD and Price. Price DT's and DB's can be Close, Exact or Greater by any amount. MACD must make the required corresponding higher low/lower high (for long or short).

For good divergence profit potential, Price must be in good "cycling" volatility and the MACD must retrace at least 50% or more (more is better) of it's established range within signal formation. There's a lot more I've discovered but this is simple and it works fairly well.

I also use a modified stoch to re-confirm the divergence but entry is ONLY taken when the MACD makes it's first turn into the new trend direction on the correct color bar (up for long and down color for short). Glad to elaborate if necessary.

Roger

hi..i love divergence patterns, but cannot code.

trying to put together a strategy to show rsi increasing (minimum of 1), macd increasing (minimum of .0001) and twiggsmoneyflow crossed over zero....

can anyone code this for market analyzer OR a custom strategy/script/alert.

Thanks for any feedback

mystiq

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  #7 (permalink)
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This is going to seem a little goofy, but there's a method to my madness.

First, the assumptions:
1] You use an indicator to help spot divergence
2] There is a method of distinguishing good divergence from bad
3] Once you isolate good divergence, you need a set of tools to monitor market conditions before entering the trade

The tools would be created by sifting through historical data and identifying which market conditions create the best opportunities. For example, a nice divergence pattern is identified and repeats itself over and over. If traded every time the success rate is 50%. But by filtering those trades to enter only when volume is increasing the rate jumps to 65%.

Then you might add other filters such as volatility, tick rate, etc. to increase the success rate further. In short, these filters would serve as "gauges" to let you know if the porridge is too hot, too cold or just right.

It has always seemed to me that having these "gauges" at our disposal would help keep us out of bad trades by providing visual clues. We all sense market conditions when watching the charts but turning those senses into tangible data would be a big plus, especially when dealing with divergence.

Sure it's pie in the sky, but someday we may have just such tools.

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  #8 (permalink)
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I agree. So, by all means, start posting charts of what you are talking about, and I will code them as soon as I can.
Thanks.

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hondo69 View Post
This is going to seem a little goofy, but there's a method to my madness.

First, the assumptions:
1] You use an indicator to help spot divergence
2] There is a method of distinguishing good divergence from bad
3] Once you isolate good divergence, you need a set of tools to monitor market conditions before entering the trade

The tools would be created by sifting through historical data and identifying which market conditions create the best opportunities. For example, a nice divergence pattern is identified and repeats itself over and over. If traded every time the success rate is 50%. But by filtering those trades to enter only when volume is increasing the rate jumps to 65%.

Then you might add other filters such as volatility, tick rate, etc. to increase the success rate further. In short, these filters would serve as "gauges" to let you know if the porridge is too hot, too cold or just right.

It has always seemed to me that having these "gauges" at our disposal would help keep us out of bad trades by providing visual clues. We all sense market conditions when watching the charts but turning those senses into tangible data would be a big plus, especially when dealing with divergence.

Sure it's pie in the sky, but someday we may have just such tools.

Here is a screenshot of a live trade I took on Friday using NT7 B15. My setup is quite simple. It has a couple of "gauges" as suggested by Hondo - eventhough I hadn't thought of it in that way before. I kind of like it!

Here are the elements - from the bottom up -
1. Colored bar at the bottom - purple look for shorts. Green look for longs. 50 period T3 Average.
2. GOMCDMA - 5 SMA - script changed to non-cumulative per post by Fiki - I can't find the post anymore. I just use this indicator to find divergence.
3. 20 period Bollinger Bands. I have found the higher probability trades come off of a recent touch of the bollinger band.

Mahlon

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Here are a couple of screenshots of an indicator I would like to see coded using the re-coded D3Spotter.

Any help to code would certainly be appreciated. A visual and/or audible alert would be most helpful.

Thanks,
emini

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eminitrdr View Post
Here are a couple of screenshots of an indicator I would like to see coded using the re-coded D3Spotter.

Any help to code would certainly be appreciated. A visual and/or audible alert would be most helpful.

Thanks,
emini


nice chart....!

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A more detailed explanation of what I look for. I explained it the best I can on the chart. I am not a programmer. I apologize I can't explain it in programming terms.

Also, a snapshot of the divergences that just occurred after a nice upmove early this am.

emini

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I saw this in an old thread elsewhere . He apparently is a deciple of Linda raschke and developed this himself with guidance from her . The idea is to catch price falling or rising off the LOD or HOD and uses ADX combined with the keltner channel to gauge when the trend may be overbought or sold . This setup occured this morning and went for a few pips . 0500 and 0515 bars would qualify to short but price didnt trade below them ( ORB ) so dont enter at the close of the bar . Thought you all might want to give this idea a try .

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I'll show an example where it did not work. Please note the difference in the divergences. As Zac stated earlier, we may need a "conditional" filter to make the odds greater in our favor...percentage of prior histogram height or something someone may see, etc.

Anyways, last post and I'll remain quiet.

emini

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Glad to see some of you guys apparently realizing that divergence alone is almost useless. Divergence signals MUST be filtered. Then they can become a very powerful weapon. Form is one factor but good divergence form is almost always misunderstood by traders. Other factors that must be included are Market Volatility (cycling), Channel Position, Market Condition, Volume, etc. If you don't look at all of the major factors that can affect divergence potential (both positive and negative), you'll have a hard time trading a divergence based system.

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Thanks guys. I appreciate your contributions. @eminitrdr I can see now that converting my MACD hist. diverg. ind. will be easier then I thought, because the RSqueeze oscillates around the zero line just like the macd hist. I will just need to make ind. value adjustments, because macd hist is approx. 0.2 where RSqueeze is 0.0001. Maybe this weekend.
As a reminder, D3Spotter is not my code. If you want D3Spotter re-coded please contact dadof3and3. I will be using my NT7 ind. code as a template...

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zacharydw00 View Post
Thanks guys. I appreciate your contributions. @eminitrdr I can see now that converting my MACD hist. diverg. ind. will be easier then I thought, because the RSqueeze oscillates around the zero line just like the macd hist. I will just need to make ind. value adjustments, because macd hist is approx. 0.2 where RSqueeze is 0.0001. Maybe this weekend.
As a reminder, D3Spotter is not my code. If you want D3Spotter re-coded please contact dadof3and3. I will be using my NT7 ind. code as a template...


Did you manage to create any new indicator based on the D3spotter?

Cheers

Isak

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Did you manage to create any new indicator based on the D3spotter?
Cheers
Isak

No. As you quoted me "As a reminder, D3Spotter is not my code. If you want D3Spotter re-coded please contact dadof3and3. I will be using my NT7 ind. code as a template.."

However, I do have a beta version using my code.
Written in NT7, should work in 6.5

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rogerf View Post
Glad to see some of you guys apparently realizing that divergence alone is almost useless. Divergence signals MUST be filtered. Then they can become a very powerful weapon. Form is one factor but good divergence form is almost always misunderstood by traders. Other factors that must be included are Market Volatility (cycling), Channel Position, Market Condition, Volume, etc. If you don't look at all of the major factors that can affect divergence potential (both positive and negative), you'll have a hard time trading a divergence based system.

Not all indicators produce divergences of the same quality. Some indicators produce more accurate divergences then others. Compare divergences from various price based indicators, and divergences from volume based indicators, you will find that some give better divergence signals then others. The amount of filtering you need will depend on what indicator you use.

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monpere View Post
Not all indicators produce divergences of the same quality. Some indicators produce more accurate divergences then others. Compare divergences from various price based indicators, and divergences from volume based indicators, you will find that some give better divergence signals then others. The amount of filtering you need will depend on what indicator you use.


i *agree*

i like to use the macd2,3,2FAST/SLOW lines AND price highs/lows for divergence signals
and weekly macd2,3,2HISTOGRAM to guage strength

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Great to see some of you guys making headway with some divergence indicators. I think mystiq is correct about some indicators producing better quality signals but I think it's even more important to consider what parameters you are applying to those indicators. Any oscillator, for instance, can be made to show divergence with price but, given different input values, they can be made to indicate the complete opposite.

It's almost impossible to guess at the optimum input values. What would have worked great today usually fizzles quickly when forward tested. That's why any robust divergence indicator must be coded into a backtestable strategy and prove to work sufficiently well in practically any market or timeframe without tweaking (curve fitting). This is a long and tedious process that should ultimately produce many divergence signals with good profit potential. But you still won't be able to trade it profitably because, along with the great signals, you'll get a lot of "trash trades" and spotting the difference is often not easy.

Two big problems with trading divergence are the inevitable trash trades and, by their nature, you miss a lot of great trade opportunities to trade with the trend instead of always against it. I strongly recommend traders include some "with trend" entries in their arsenal of trading weapons. But how do we eliminate those pesky divergence signals that aren't going to make us a dime? The answer is, "We can't eliminate them". But we sure can thin them out a lot...certainly enough to make trading a profitable enterprize for the disciplined trader.

You learn a lot when you study something for 8 hours a day every trading day for over a decade. I'm still discovering new properties of divergence. Fascinating stuff. Why some divergence signals work and others don't is usually pretty obvious even when the signal forms were nearly identical. But the "evidence" is usually scattered over several charts in different timeframes...even different types of charts for that matter. For instance, are we trying to go long in the ES on a 1-minute chart when when all of your indicators on a 3 period Renko shows the ES is ready to tank? Your 1-min chart signal might work, but it could never be considered a high potential trade.

So, if we can gauge the success potential of a well formed divergence signal simply by looking around before we pull the trigger, how can we not be successful on most trades? Because most traders are capable of looking at a few things...a couple of indicators on a couple of charts...but most are not capable of processing all of the necessary data in time to take the trade when it should be taken. Only computers can process boatloads of information fast enough to give you the answers you need in plenty of time. This is why I firmly believe that any good robust trading system should be coded. If it can't be coded then it's obviously loaded with subjectivity and of doubtful value. What info is processed and how it's processed is vitally important. The GI GO rule always prevails.

The attached chart shows most of my signal types...Basic Divergence (BD) and Extended Divergence (ED). Those are my counter-trend signals. The Hidden Divergence (HD) and the Lump Trade (LP) are my with-trend signals. You'll notice a multi colored stochastic for finding divergences and a multi colored trend line. The bottom panel is what I call my Momentum Change indicator. The colored horizontal lines are Murrey and work great for support and resistance levels...and a good number of other uses...but I am not a proponent of Murrey Math as a trading system.

The striped bar indicator in Panel 2 is very useful. It let's me look at what's going on with any number of indicators in an unlimited number of timeframes and chart types from Renko, Line Break, Tick, Range, etc. without having to take my eyes off of my primary trading chart which, in this example, is a 5 Better Renko (available in Big Mike's Elite section) of the CL (oil). I like trading on a Renko chart because I always know what the closing price of my entry bar will be and can easily enter with limit orders and trade with virtually no slippage. The strongest entry indication is when the red & white "candy cane" is present when a short signal fires or blue and white present when a long signal triggers.

These signal entries are highly filtered and were all computer generated. The code is able to look at each indicator separately and it knows exactly what it needs to see for an ok for a signal to appear . I can eliminate all of the indicators that you see here from view and just look at Price and the signal entries that are produced in real time with plenty of warning. Makes the complex very simple but it's taken over 30,000 lines of code to get it to this point.

Anyone wanting to learn more of how I trade using this system can simply contact me to schedule a session 1-on-1. Note that I am a vendor (educator), but understand that I will neither ask nor accept payment in any form for anything I share with my fellow futures.io (formerly BMT) friends. Just glad to help if I can. I'll probably post some of my indicators here on the forum after the holidays. I have more that were not discussed in this post.

Happy New Years!

Roger Felton

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rogerf View Post
Great to see some of you guys making headway with some divergence indicators. I think mystiq is correct about some indicators producing better quality signals but I think it's even more important to consider what parameters you are applying to those indicators. Any oscillator, for instance, can be made to show divergence with price but, given different input values, they can be made to indicate the complete opposite.

It's almost impossible to guess at the optimum input values. What would have worked great today usually fizzles quickly when forward tested. That's why any robust divergence indicator must be coded into a backtestable strategy and prove to work sufficiently well in practically any market or timeframe without tweaking (curve fitting). This is a long and tedious process that should ultimately produce many divergence signals with good profit potential. But you still won't be able to trade it profitably because, along with the great signals, you'll get a lot of "trash trades" and spotting the difference is often not easy.

Two big problems with trading divergence are the inevitable trash trades and, by their nature, you miss a lot of great trade opportunities to trade with the trend instead of always against it. I strongly recommend traders include some "with trend" entries in their arsenal of trading weapons. But how do we eliminate those pesky divergence signals that aren't going to make us a dime? The answer is, "We can't eliminate them". But we sure can thin them out a lot...certainly enough to make trading a profitable enterprize for the disciplined trader.

You learn a lot when you study something for 8 hours a day every trading day for over a decade. I'm still discovering new properties of divergence. Fascinating stuff. Why some divergence signals work and others don't is usually pretty obvious even when the signal forms were nearly identical. But the "evidence" is usually scattered over several charts in different timeframes...even different types of charts for that matter. For instance, are we trying to go long in the ES on a 1-minute chart when when all of your indicators on a 3 period Renko shows the ES is ready to tank? Your 1-min chart signal might work, but it could never be considered a high potential trade.

So, if we can gauge the success potential of a well formed divergence signal simply by looking around before we pull the trigger, how can we not be successful on most trades? Because most traders are capable of looking at a few things...a couple of indicators on a couple of charts...but most are not capable of processing all of the necessary data in time to take the trade when it should be taken. Only computers can process boatloads of information fast enough to give you the answers you need in plenty of time. This is why I firmly believe that any good robust trading system should be coded. If it can't be coded then it's obviously loaded with subjectivity and of doubtful value. What info is processed and how it's processed is vitally important. The GI GO rule always prevails.

The attached chart shows most of my signal types...Basic Divergence (BD) and Extended Divergence (ED). Those are my counter-trend signals. The Hidden Divergence (HD) and the Lump Trade (LP) are my with-trend signals. You'll notice a multi colored stochastic for finding divergences and a multi colored trend line. The bottom panel is what I call my Momentum Change indicator. The colored horizontal lines are Murrey and work great for support and resistance levels...and a good number of other uses...but I am not a proponent of Murrey Math as a trading system.

The striped bar indicator in Panel 2 is very useful. It let's me look at what's going on with any number of indicators in an unlimited number of timeframes and chart types from Renko, Line Break, Tick, Range, etc. without having to take my eyes off of my primary trading chart which, in this example, is a 5 Better Renko (available in Big Mike's Elite section) of the CL (oil). I like trading on a Renko chart because I always know what the closing price of my entry bar will be and can easily enter with limit orders and trade with virtually no slippage. The strongest entry indication is when the red & white "candy cane" is present when a short signal fires or blue and white present when a long signal triggers.

These signal entries are highly filtered and were all computer generated. The code is able to look at each indicator separately and it knows exactly what it needs to see for an ok for a signal to appear . I can eliminate all of the indicators that you see here from view and just look at Price and the signal entries that are produced in real time with plenty of warning. Makes the complex very simple but it's taken over 30,000 lines of code to get it to this point.

Anyone wanting to learn more of how I trade using this system can simply contact me to schedule a session 1-on-1. Note that I am a vendor (educator), but understand that I will neither ask nor accept payment in any form for anything I share with my fellow futures.io (formerly BMT) friends. Just glad to help if I can. I'll probably post some of my indicators here on the forum after the holidays. I have more that were not discussed in this post.

Happy New Years!

Roger Felton

Roger,

A great post, but curious on what HD (Hidden) or ED (Extended) is? I am guessing Extended divergence is just divergence that continues? Hidden I have no idea...

Your post was very clear and precise. Good work.

Oh, one more comment. ForexFactory and MT4 is lightyears ahead of what guys have on the other platforms it seems to me at least from what I have coded or played with. It is good to see some of your indicators be on par with MT4.

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bluemele View Post

Oh, one more comment. ForexFactory and MT4 is lightyears ahead of what guys have on the other platforms it seems to me at least from what I have coded or played with. It is good to see some of your indicators be on par with MT4.

I completely agree regarding MT4.
Its a shame they cant be easily converted to ninjatrader. They are so much better

PS - Roger, when you said you would post some of your indicators here, did you mean divergence indicators, and did you mean in THIS thread?

cheers

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