Divergence Trading Strategy- Advanced

[Do Or Die 10]

Hi,

 

This follows from the RS- Internal thread.

 

I have been able to code the classic divergences to a satisfactory level without a future looking formula. The peculiarity of this method is that it detects a divergence before the second consecutive peak/trough actually occurs on chart (anticipatory discovery). This eliminates the huge lag in decision making caused by waiting to confirm the second peak/trough. See this chart:

 

Most codes that I've seen around either use a future looking formula like zig-zag and/or wait for the confirmation of second peak/trough. By the time the second consecutive pivot is confirmed, market has already moved away by few bars. In V-shaped pivots, the move is already over if one goes by the traditional way of comparing two peaks on prices vs. an oscillator.

 

More charts:

 

BTW, the 'advanced' word in title is more of a cliche; the strategy is actually basic (conceptual); i.e. mark opportunity when a stock seems to move lower while it's internal relative strength actually increases.

 

I will be calling some signals live in this thread, so it will also serve the purpose of a journal, to improve the strategy.

Edited December 8, 2011 by Do Or Die

[Do Or Die 10]

Earlier detection of RSI divergence also helps in keeping tighter stop. So it helps in both reducing the risk and maximizing potential reward. I use the most recent pivot high, bar high or support as stop loss.

 

Shorts triggered in VRSN, DGX, AET, CMS, EOG, ETN, NSC, SLB, FDX.

[UrmaBlume 10]

RSI is still completely based on price. So the divergence is between raw price and a means of measuring price. Divergences that only look at price do not consider the forces that drive price.

 

More reliabe divergeces are the ones between price and the buying and selling volumes that propel price.

 

The chart below shows a session low in the ES where there was an obvious lower low in price but at the same time there was a higher low in the indicator of buying a selling strength and that the higher low in the indicator actually came before the lower low in price.

 

 

More Price/Balance of Trade Divergences:

 

 

 

 

 

 

 

 

 

 

 

Cheers,

 

UrmaBlume

[UrmaBlume 10]

The point is that price is not the best predictor of price and that trade imbalance is what drives price. Thus divergence between raw price movements and the forces that drive price stand to deliver a more reliable signal than divergence between price and just another measure of price.

 

Measures of divergence between price and RSI, MACD and Stochastic are not really so much divergences as a matter of process and settings on the same input.

 

However divergences between price and indicators based on order flow/balance of trade with price as no part of their calculation measure a divergence between price and what drives price. A much more reliable indicator with a greater depth of information.

 

The herd uses RSI, MACD and Stochastics and for using those original, state of the art tools and techniques the herd is rewarded as blind, unthinking, uncreative followers should be rewarded.

 

Information = Equity

 

If your information is the same as everybody else's then expect to have the same result as most everybody else and we all know what that is.

 

UrmaBlume

[Do Or Die 10]

Hello,

 

I think you have written a lot about the 'herd mentality' and your 'proprietary' indicator. So I asked you to log a live trade record (in another thread).

 

thanks.

[UrmaBlume 10]

Hello,I think you have written a lot about the 'herd mentality' and your 'proprietary' indicator. So I asked you to log a live trade record (in another thread).thanks.

 

I thought the topic here was "Divergene Trading Strategy - Advanced."

 

My point is that divergence trading using RSI, MACD or Stochastic is hardly advanced and has been known and used by the herd for decades with herd type results.

 

As to a live trade record - its your thread so why not post one.

 

My post is about Divergence Trading and discusses divergence between price and the force that propels price instead of the difference between 2 different measures of price which is really no true divergence at all.

 

I have mentioned no product, service or site here. My posts have been on topic and so should your replies.

 

The topic here is Divergence Trading and I say that a Divergence/Difference between price and the forces that drive price is truer measure of divergence than a difference between price and just another measure of price.

 

UrmaBlume

[Do Or Die 10]

I thought the topic here was "Divergene Trading Strategy - Advanced."

 

My point is that divergence trading using RSI, MACD or Stochastic is hardly advanced and has been known and used by the herd for decades with herd type results.

 

Good to know that you read the title. I wish so much that you also read the first few lines of post before hurrying to promote your indicator.

As to a live trade record - its your thread so why not post one.

ROFL.

 

Amazing.

 

All the signals I posted are in profit. I will post live signals, which are a good proxy for my analytical methods. I do not need to post actual trades because I'm not and do not ever intend to solicit money for indicators or money management.

 

I will leave you now to re-think before attempting another off-topic post.

[UrmaBlume 10]

Trade Records and whether or not I am a vendor are hardly to topic. Yes, indeed, I do run a software company and I have paid TL for a sponsored thread where I discuss my products. Here, in this discussion of Divergences, you have made much mention of that - I have made none.

 

My premise is that Divvergences that note RSI, MACD & Stochastic are old news and have been used ineffectively for decades by public/retail traders who don't seem to be able to see beyond the sameO, sameO.

 

The second part of that premise, still on the topic of divergence, is that measures of divergence between price and indicators that consider the buying and selling volumes/forces that propel price offers a much more reliable indication of both divergence and pending change.

 

In numbers, a very, very small percentage of total traders make money long term. Also that same very small percentage of traders make a very, very big percentage of the total money that is made.

 

My money bet is that of that very small percentage of those who make all the real money in this game are using Price/RSI divergences. What a huge laugh you would get if you took that approach to any profitable, tech-based trading or hedge fund operation today.

 

How say you?

 

UrmaBlume

[Do Or Die 10]

Trade Records and whether or not I am a vendor are hardly to topic.

Since you asked, you have posted historical charts with colorful indicator. You are promoting a particular indicator, which is only available on payments. Unlike you, I have taken the pain to explain my method in great detail.

 

What a huge laugh you would get if you took that approach to any profitable, tech-based trading or hedge fund operation today.

 

FYI, there are thousands of vendors on internet who claim their indicators are 'scientific' using all the 'scientific' terminology. Apparently many also claim to successfully pick the tops and bottom, similar to your posted charts. How many call their trades live? How many have guts to register as CTA and stop relying on income from selling indicators? I've come across only one DISFA Global. Goodluck in your career.

 

In any case, I will try to ignore any off topic posts, and concentrate back on trading

[UrmaBlume 10]

There are many indicators both free and for sale that read order flow and the balance of trade - not just mine.

 

I say that divergences between price and the forces that drive price are more useful than divergences between price and just another calculation of price.

 

So, if the topic here is divergence as a strategy then which do you think should be more useful - price compared to price or price compared to the forces that drive price.

 

Readers here are more interested in learning better sources of trade decision support information than they are hearing you complaining about me being in the software business.

 

Everybody already knows about divergences between price and RSI, MACD and Stochastic - far fewer know about divergences between price and order flow.

 

If the whole purpose of Trader's Laboratory is the rational disucssion of trading techniques and technologies, then I propose this question to you and other readers here

 

Which form of divergence seems to offer more reliable/useful trade decision support information:

 

Divergences/differences between price and a recalculation of price or

 

Divergences/differences between price and the buying and selling volumes that

propel/motivate price?

 

No reason to get mad or feel threatened - Here I have merely put forth both a premise and a question, both of which are completely on topic.

 

UrmaBlume

[Do Or Die 10]

If the whole purpose of Trader's Laboratory is the rational disucssion of trading techniques and technologies, then I propose this question to you and other readers here

 

Which form of divergence seems to offer more reliable/useful trade decision support information:

 

Divergences/differences between price and a recalculation of price or

 

Divergences/differences between price and the buying and selling volumes that

propel/motivate price?

 

 

Let me repeat it (perhaps) fourth time

 

I am maintaining a log here about the strategy which you call 'herd mentality'.

 

You go ahead and log live trades for whatever you feel is the greater truth.

 

Let PnL speak louder than charts.

[hunter1 10]

posting a picture of a 10 pt run- took 6.5 out of it- from today from 11:51 est. This is my entry chart so you cant see the whole move on this chart. also will leave discussion of what the lines on chart are out of it. key is you see the dvg from the thick blue line. Dvg is based on price and volume not oscillators. Top bars are price.

[Do Or Die 10]

posting a picture of a 10 pt run- took 6.5 out of it- from today from 11:51 est. This is my entry chart so you cant see the whole move on this chart.

 

LOL, more historical charts. Strange why people shy away from logging a live track record. One more and I will dump this thread to start another in Traders Log section.

[UrmaBlume 10]

One more and I will dump this thread to start another in Traders Log section.

 

Well said. The title of the thread implies it is to be a discussion about divergences and trading strategies related to divergences, if not and it is to just be a log of your trades you should have said so.

 

Yet still the question remains:

 

"Which form of divergence seems to offer more reliable/useful trade decision support information:

 

Divergences/differences between price and a recalculation of price or

 

Divergences/differences between price and the buying and selling volumes that

propel/motivate price?"

[Do Or Die 10]

Actually I mentioned in the first post that this thread is for maintaining log of live signals.But apparently you did not read that in a hurry to post charts of your 'proprietary' indicator.

 

Yet, the question still remains:

How many call their trades live? How many have guts to register as CTA and stop relying on income from selling indicators? I've come across only one DISFA Global. Goodluck in your career.

 

Historical charts with mysterious 'holy grail' indicators form the perfect recipe to trap newbies

[MightyMouse 12]

LOL, more historical charts. Strange why people shy away from logging a live track record. One more and I will dump this thread to start another in Traders Log section.

 

It seems to me that people feel like they will lose something more than money if they post live trades. I have tried endlessly to get others to post trades. My feeling is that if you are going to say you are capable of doing something, then you should be willing to show it.

 

I did it in the S&P 500 short term trading log ( I think that is the name) and I do recommend it. You will feel a bit vulnerable, but that feeling passes and as your ego gets tamed. A tamed ego is important to a trader.

[Do Or Die 10]

Continued from the starting posts...

 

dgx, aet, cms, etn, nsc, slb, fdx, are in favor.

 

eog and etn somewhat dangerous.

 

No long signals, yet. All trades on daily charts only, because they can be conveniently posted in non-market hours. If feasible, I will try to post maybe few on intraday time frame such as 2-minute.

 

PS: Do not post in this thread the following, you are always free to start your own thread:

1. Charts with mysterious black-box indicators

2. Claims about profitability of a method without log of live trades

3. Please read the starting post, inclusive of these sentences:

"BTW, the 'advanced' word in title is more of a cliche"...

"I will be calling some signals live in this thread, so it will also serve the purpose of a journal..."

[hunter1 10]

First I apologize. I thought this was a thread on discussing divergence trading. I thought that the traders log section was for people posting a log of their trades and trading method. My mistake.

 

Second I posted because I agree with Urma about methods of reading divergence that do not depend upon oscillators like RSI etc.

 

Third using delta candles to read divergence is hardly black box and I am willing to bet there are other good traders on this forum that use delta candles the same way I do.

 

Fourth I have been running a free skype room for 18 months where I share my trades live and other share theirs as well. The room has about 30 to 40 members maybe more so there are plenty of folks that can attest to my live trading.

 

Fifth what good is a log other than an ego massage. Open or join a skype room and call your trades as they happen so the world can see in real time the entries and exit. Posting a log is just another way of past posting.

[Do Or Die 10]

First, if someone *really* wants to teach me something useful I would willfully bow in respect.

 

Second, it is usually a good practice in forums to read someone's post before replying. In the case something is not clear, straightforward attacking shows the insecurity of the poster. My method of marking a divergence, as explained previously, cannot be found on internet or textbooks. In any case if it gives some the right to call it 'laughable' and 'herd mentality', I'll let my live log speak who is laughable here.

 

Third, you made a small post with a chart that had no labels. "key is you see the dvg from the thick blue line." How do you suppose for me to learn about the blue line? and how to assume delta candles?

 

Fourth, I'm done running a private forum for strictly professional traders. I'm done running chat rooms before that. And I think this stuff is totally off-topic to this thread.

 

Fifth, it is usually a good practice in forums to read someone's post before replying. In the case something is not clear, straightforward attacking shows the insecurity of the poster. I used the word 'live' along with tradelog every time. Posting within minutes of signal generation is irrelevant if working on daily time frame. For example, the two short calls on AAPL mentioned here http://www.traderslaboratory.com/forums/stock-trading-laboratory/10662-stocks-model-2.html lack hindsight completely. Similarly the signals I mentioned in this thread are supposed to be carried for weeks, (that is called daily time frame), so they are credible enough even if posted after market hours.

 

PS: Do not post in this thread the following, you are always free to start your own thread:

1. Charts with mysterious black-box indicators

2. Claims about profitability of a method without log of live trades

3. Please read the starting post, inclusive of these sentences:

"BTW, the 'advanced' word in title is more of a cliche"...

"I will be calling some signals live in this thread, so it will also serve the purpose of a journal..."

[wrbtrader 10]

Do Or Die,

 

It's very easy to stop the arguing or debates (depending upon how it's looked at) via asking the forum manager to change your thread titled to the following...

 

RSI Divergence Trading Strategy (Live Calls Only)

 

or

 

RSI Divergence Trading Strategy (Real-Time Trades Only)

 

I say that because when I read the titled and then I see the discussion...it's a little confusing because your first message post seems as if you're the one making live calls and that there's "no requirement" for others to make live calls.

 

Edit - I enjoy reading threads with live calls (real-time trades or real-time price action discusions)...it's just as useful or arguably more useful than hindsight analysis.

 

Out of curiosity, how do you select which stocks to monitor for RSI Divergence trade signals. Meaning, do you follow a specific type of stock and only watch those stocks for RSI divergence setups. ???

Edited December 10, 2011 by wrbtrader

[Do Or Die 10]

Actually I thought the same for a moment, but gave up on the idea immediately because the title does not gives anyone the right to call strategy useless. Also, I do not censor discussions without live calls, but if someone is promoting a method religiously, he should provide a credible trade log. Refer to MightyMouse's post, there was similar post from Tams deleted for being blunt.

 

I'm running the scan for divergence on SnP 500 symbols only; days on which there are 5 or more signals are preferred.

 

As per my username, 'Do Or Die'; challenges inspire me, and short-term failures motivate to improve long-term strategy. So loving all the 'arguments'

 

PS: Do not post in this thread the following, you are always free to start your own thread:

1. Charts with mysterious black-box indicators

2. Claims about profitability of a method without log of live trades

3. Please read the starting post, inclusive of these sentences:

"BTW, the 'advanced' word in title is more of a cliche"...

"I will be calling some signals live in this thread, so it will also serve the purpose of a journal..."

[UrmaBlume 10]

First I apologize. I thought this was a thread on discussing divergence trading. I thought that the traders log section was for people posting a log of their trades and trading method. My mistake.

 

Second I posted because I agree with Urma about methods of reading divergence that do not depend upon oscillators like RSI etc.

 

Third using delta candles to read divergence is hardly black box and I am willing to bet there are other good traders on this forum that use delta candles the same way I do.

 

Fourth I have been running a free skype room for 18 months where I share my trades live and other share theirs as well. The room has about 30 to 40 members maybe more so there are plenty of folks that can attest to my live trading.

 

Fifth what good is a log other than an ego massage. Open or join a skype room and call your trades as they happen so the world can see in real time the entries and exit. Posting a log is just another way of past posting.

 

 

Very well said Hunter.

 

Delta or my moving window of order flow are hardly mysterious black box indicators. While they haven't been around as long as RSI, MACD & Stochastic, many traders are starting to find they improve the efficacy of thier trading and offer more setups than merely spotting divergences.

 

It may be that the resistance to discussing anything other that price/price divergences is because the topic is out of the OP's depth. Price/Price divergences which are not real divergences at all have been around forever and discarded by those that have suffered the cost of trading them.

 

Price/Price divegences are hardly divergence because how can price diverge from itself. Divergence between price and buying and selling volumes is another matter and can be a very effective means of noting either reduced or increasing strength behind price.

 

Price/Price divergence advanced? Hardly. There is indeed a place for logs and that's where this guy should post his "advanced divergence trading strategy."

 

UrmaBlume

[Adrian 10]

@URMA Would you mind posting some charts showing examples of where your divergence worked and regular price divergence did not work please.

[Do Or Die 10]

@URMA Would you mind posting some charts showing examples of where your divergence worked and regular price divergence did not work please.

 

Wow, more historical charts for the mysterious black box indicator.

 

The indicator for which Mr. Vendor cannot share code or make live calls.

 

PS: Do not post in this thread the following, you are always free to start your own thread:

1. Charts with mysterious black-box indicators

2. Claims about profitability of a method without log of live trades

3. Please read the starting post, inclusive of these sentences:

"BTW, the 'advanced' word in title is more of a cliche"...

"I will be calling some signals live in this thread, so it will also serve the purpose of a journal..."

Edited December 10, 2011 by Do Or Die

[UrmaBlume 10]

Delta Bars and a moving window of order flow are mysterious black boxes?