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Trading Divergence
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Trading Divergence

  #11 (permalink)
 R.I.P. 1960-2010 
 
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Almost everything I do now is based on divergences or non-confirmation of price movement vs the BuySellVolume Delta Momentum.

Got fooled on the 1st trade but had high enough confidence to add to the position as it went up and then fell.

R.I.P. Andy Zektzer (ZTR), 1960-2010.
Please visit this thread for more information.
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  #12 (permalink)
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That is a completely different approach and should work. The point is that if you take price and construct a lot of complicated indicators from price, the information contained is price and only price. So basically it will confuse you.

However, if you add new information such as

- volume
- bid and ask traded volume
- market depth for index futures (tick)
- open interest (not available intraday)

this really helps to track the market and find out what the other ones you trade against are doing.

I cannot follow that approach, as I use Interactive Brokers and cannot rely on the bid and ask traded volume shown. How exactly do you use these divergences to trade?



ZTrade101 View Post
Almost everything I do now is based on divergences or non-confirmation of price movement vs the BuySellVolume Delta Momentum.

Got fooled on the 1st trade but had high enough confidence to add to the position as it went up and then fell.


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  #13 (permalink)
 R.I.P. 1960-2010 
 
Futures Experience: Advanced
Platform: NinjaTrader7
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Favorite Futures: CL & 6e, looking at ES, ZB and AU again.
 
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Most of the indicators developed by Zondor and myself rely on the GOM recorder.

BuySellVolume looks at the number of contracts traded at the bid or ask. It add special significance to trades made when there is an empty row in the DOM. Usually a point of indecision, but also happens at the end of moves when traders are desperate(?) to exit a position.

Move down stops, & next move up is not confirmed by buying and more selling ensues until a failed failure happens at the previous local low.

R.I.P. Andy Zektzer (ZTR), 1960-2010.
Please visit this thread for more information.
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  #14 (permalink)
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Thank you for putting this right!

1. Correct, I misread one of the charts, and MACD usually is constructed from EMAs.
2. I did not mean this allusion to Baskerville, but I was thinking about a dog that barks, once the visitor arrives (new price) and then barks again, when the visitor leaves (old price), but as you said, MACD are constructed from EMAs, so it does not apply here.

Thank you for putting this right!


Richard View Post
Hi there . Two things:
  1. A typical MACD is made of EMAs. Nothing "drops out" of an IIR filter.
  2. The Baskerville effect - Wikipedia, the free encyclopedia is related to psychological stress
Thanks.


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  #15 (permalink)
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Hidden Divergence and the Klinger Oscillator

Have you guys ever observed hidden divergences? If so, have you found them useful? I just started reading about them. I think they give continuation signals instead of reversals. They may help in situations as discussed earlier when multiple regular divergence signals are generated before an actual reversal takes place.

I have put the Klinger Oscillator on my chart recently. Does anyone have any experience with it? Its divergence signals are quite different from say an RSX or a MACD. I think it's supposed to be some sort of volume oscillator, but I'm not sure how it works.

I will try to post a chart tomorrow, if you guys would care to give any input.

Thanks,

Mahlon

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  #16 (permalink)
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Here is the chart and the settings.

Mahlon

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  #17 (permalink)
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Hi Mahlon,

took me some time to answer, because I had not used the Klinger Oscillator before. So this is what I have done:

(1) Put the version that I downloaded from the forum onto my chart. I did nto check the formulae of the code, so I do not know, whether this is the real Klinger Oscillator or not. For most of the indicators you will find 5 to 10 different versions all producing different results.

(2) Then tried to find out how this could be possibly used, without reading anything about it. It looks like a sort of money flow over a period of time, so you could use it in the following ways

- spot divergences
- enter a trade when the indicator crosses its signal line
- use it in a similar way as the "Anti" setup from Linda B. Raschke to enter pullback trades
- use it as a trend filter itself

I will comment on the four different possibilites and start with divergence here

Divergences

The Divergences I have seen cannot be reliably traded without any other filters or restrictions. I will just show one example from todays 1-minute-chart

I have drawn two divergences between the Klinger Oscillator and price. The first one would have failed, the second one would have worked out. So you can only use it within a context that supports price reversal as opposed to a temporary consolidation.

If you look at the five minute chart, you will see that for the second divergence price was hitting resistance in an oversold area, as indicated by the Keltner channel. So the second divergence was tradeable. But you could have seen this directly from the volume of the 5 minute chart, because volume peaked with the doji and formed several churn bars. Charts are below.

Resources

The Klinger Oscillator was first presented by its creator in the December 1997 issue of Technical Analysis of Stocks and Commodities. You can purchase the original article for USD 3.95

V.15:12 (556-560): Identifying Trends with Volume Analysis by Stephen J. Klinger, CMT

Further the original formulae for the Klinger Oscillator can be found here:

Traders Tips - December 1997

Would be interesting to know, how Mr. Klinger used his indicator!

Will come back to have a look at the other setups.


mahlonhersh View Post
I have put the Klinger Oscillator on my chart recently. Does anyone have any experience with it? Its divergence signals are quite different from say an RSX or a MACD. I think it's supposed to be some sort of volume oscillator, but I'm not sure how it works.

Thanks,

Mahlon


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Trading Divergence-klinger-divergences.jpg   Trading Divergence-larger-timeframe-analysis.jpg  

Last edited by Fat Tails; May 5th, 2010 at 04:54 PM.
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  #18 (permalink)
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Fat Tails,

Thanks for your input!

Mahlon

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