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Chapter 18, Part II. Trading Divergences. Page 8

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Commander in Pips: Sure. Let’s just draw this fragment a bit larger on chart #7:

    Let’s go right on our steps:

    1. Identify DP. We see the trend has turned bearish at close price, while price itself simultaneously stands in the sideway move.

    2. Price forms higher lows with bar closes near highs. Then we see that the market is forming higher lows. These bars, that jump from so called support line show very high closes. The bright examples are bars 6 and 7. So, we can say that this is DP. Although the market has shown some kind of W&R and cleared out stops that had been placed below the trend line, it then turns to a strong move up, that even more confirms our assumption;

    3. Entry point. Strictly with rule – first bar, that has confirmed trend shifting to bullish. We can enter in the beginning of the next period, or even wait for some deeper retracement. Both of these ways are acceptable. Stop has been placed below the low of confirmation bar.

    Chart #7 | weekly AUD/USD - trading Dynamic Pressure

    Pipruit: All right. Now I understand this stuff clearly. Still, MACDP looks like a very useful tool. Because using it, we clearly see that trend has changed, because it shows price at which trend will shift. While using simple MACD makes this work a bit harder.​

    Commander in Pips: You’re right, but this work still could all be done only with simple MACD. Also do not forget that this is a weekly chart and you have a lot of time (all next week) to enter.

    Pipruit: Right.​

    Commander in Pips: So, I think that’s enough for today. The next part will be light – we just appoint some moments that could help to avoid failure divergences, if you use, say, Stochastic and some other simple rules.

    P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon.

    Note: FPA ranks are earned in the battles against scam, not in the classroom.
    #1 Sive Morten, Dec 21, 2013
    Lasted edited by : Apr 16, 2016
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