Trading Reversals From Divergences

September 7th, 2009, 09:16 PM

Hey folks,

I have come to the conclusion that trading reversals is HARD! I have such a low win % from trading reversals off bullish/bearish divergences (usually off MACD histogram) that I have come to the following conclusion: A bearish divergence on an indicator may be enough to keep me from going long a contract, but it won't be enough to get me to go short.

In trying to trade reversals I always wait for >= 5 waves in the direction of the trend, sell at/near resistance (e.g. pivot point, fib level) and sell on stop below the swing high bar that caused the divergence (in the case of bearish divergence in an uptrend). However I usually get burned trading reversals - I almost want to forget about trading reversals all together...except I hear so many traders say how reversals are their best/favorite/most profitable trades, so obviously I'm doing something wrong!

I would appreciate any thoughts/tips from others on this subject.

Cheers,
Simon

September 7th, 2009, 10:39 PM

what timeframe (or range, etc) are you looking at?

divergence on higher timeframe is much more meaningful than on lower timeframe.. use MTF and look for divergence across multiple scales.

September 8th, 2009, 02:14 AM

Thanks, I'll pay more attention to the higher timeframe in future.

I've been reflecting and I think my main problem is that I seem to go to some effort to make trading even more difficult than it is already (thinking that I'm smarter than the system etc).

Cheers,
Simon

Trading Reversals From Divergences

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Trading Reversals From Divergences