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Chapter 18, Part III. Divergences with oscillators. Page 3

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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    6. Use vertical lines so that price tops/bottoms coincide with indicator’s one. Be aware of wrong displacement and taking wrong top/bottoms:

    Chart #5 | 5-min EUR/USD - wrong displacement of price and indicator tops

    Chart #6 | 5-min EUR/USD - Right!

    7. Divergence will exist only if there will be difference in the slope of the lines that connect the tops/bottoms or price chart and corresponding tops/bottoms of indicator. Slope could be threefold – ascending, descending and flat.

    8. If you’ve caught divergence a bit late, so that price has moved some distance in direction of divergence – wait for another one, since divergence is not a signal, but mostly an indicator – it can’t give us a sharp target of price move due to it.

    9. The higher the time frame – the more reliable divergence will be. Although some traders use divergences on 15 min or even 5-min charts, probably in the beginning its better stay on not less than an hourly chart, or even daily.

    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.
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