Parameters description and demo files:
How to get the most from MACD|RSI divergence scanners
If you already trade based on a divergence strategy you are good to go, all you need is setting the scanner parameters based on your trading strategy, and let the scanner do the hard work of searching the symbols and timeframes and finding the divergences for you.
If you don't have previous experience in trading based on divergences, first you have to find a strategy suitable for you and getting master in it and make sure you can make profits from that strategy. Then you can use the dashboard to save your time from finding the divergences manually and let the dashboard scan the symbols and timeframes for you.
There are plenty of articles and videos for learning the divergence trading that you can find them by a bit of googling, and these are some decent YouTube videos that you can start with them:
The main usage of the dashboard is when you have a profitable divergence strategy and want to maximize your profits by finding more trading opportunities without spending a lot of time searching through different symbols and timeframes. You can also use it to practice divergence trading or testing your divergence strategy, but don't start the live trading before you have a well-tested strategy with clear rules for entering and exiting the orders.
Some notes about divergence trading:
- Trading based on divergences works best in large swings or in the direction of strong trends (when divergence happens in pullbacks). Divergences are not reliable in the range (sideways) markets or against the strong trends.
- Divergences that happen in the important areas of chart like support and resistance zones, supply and demand zones, Fibonacci levels and … are more reliable signs of ending the trend.
- It is a good practice to find divergences in larger timeframes and then search for trade signals in smaller timeframes. It reduces your stop loss distance and gives you a better reward to risk ratio.
- Check out the main trend direction in large timeframes, and ignore divergence signals in smaller timeframes that are against the main trend.
- Divergence is a sign that shows the trend is losing its momentum, not the sign of immediate end of the trend. Often traders enter a trade too soon, right after they saw the divergence. So have patience and wait for some confirmations for trend reversal like these:
- Breaking the trend line, moving average, higher low or lower high with strong candles (and preferably retesting them)
- Candlestick patterns
- Strong reversing candles
- Spike outside Bollinger Bands
- Any other confirmations that your strategy suggests
Some tips for using the dashboard:
- After adjusting the scanner parameters, save them through the "Save" button in the "Inputs" window, then you can easily load your desired settings next time you run the scanner.
- Add your confirmation indicators to default or custom chart templates, so when you click on dashboard cells, you can see the divergence signal alongside with your other technical tools in the newly opened chart.
- You can set the dashboard to automatically open charts for new alerted divergences.
- The dashboard can save the last alert type that you set for each symbol (please set the "Enable alert for symbols on startup" parameter), so you can use the dashboard as a quick reminder of your last trend analysis for different symbols in the next day or session that you start trading again.
- In the MT5 version, MACD|RSI indicator automatically will be added to the opened chart, but for MT4 you should save the MACD|RSI indicator on default and custom templates (with input parameters equal to MACD|RSI parameters in the dashboard settings). Then the dashboard draws the divergence line on the indicator in the new chart.
Filtering and fine-tuning the trend waves:
There are multiple filtering and ratio parameters that you can use them to reduces the number of signals and improve their quality. These parameters are:
- Use Moving Average filter
- Find only divergences that are in overbought/oversold levels
- Only find divergences that happen after a long trend
- Alert only if Divergence happens in S/R zones
- Ratio parameters in the "Regular Divergence Ratios" section
- Parameters in the "Strong Reversing Candle Settings" section (if you select the "Strong Reversing Candle" option in the "Confirmation Type" parameter)
- ZigZag Settings
- MACD|RSI Settings
Use above parameters to reduce the number of divergences that don't fit in your trading strategy rules and make a balance between number of signals and their quality.
Check out your failed trades to see which filters can reduce the number of signals that lead to failed divergences.
Some examples for how to use filters:
- If your strategy requires that you should trade on divergences that happen after a long trend, then enable the related parameter and set its value.
- If after many trades you find out that your successful orders are mostly on a specific type (shape) of trend waves, you can use ratio parameters to only receive alert for divergences that happen after that type of trend waves.
- The dashboard uses the ZigZag indicator for identifying the trend waves, so you can change the ZigZag parameters to increase or decrease dashboard sensitivity to price fluctuations. For example, if you don't want dashboard finds divergences that happen after small trend pullbacks, you can increase the “Depth” value to reduce the ZigZag sensitivity. Also, you can test the ZigZag indicator on different symbols and timeframes to find the best values for its parameters and then use those values in the dashboard settings.
Considering the support and resistance zones:
If you are familiar with the support and resistance concept in trading, set the scanner to find the S/R zones, and you can use them to decide which one of the divergences detected by the dashboard are a valid sign of trend reversal. In addition, you can use S/R zones for setting order stop-loss and partial take-profit levels.
You can see the support and resistance zones for all symbols and timeframes by clicking on their related cell of the dashboard.
You can fine tune the zones through the dashboard parameters and select the zone types that you want to see on the charts.
Troubleshooting:
The dashboard requires at least 350 candles in a chart to find the divergences, and in the first run of the dashboard it takes some time to download the history data for all symbols and timeframes that you loaded in the dashboard.
If Metatrader stuck in loading the data for dashboard, please consider the following items:
- Make sure that Metatrader is connected to the server and it can load the history data. Open the chart of some symbols and see if the Metatrader updates their chart or not.
- If the charts of the symbols that are loaded in the dashboard never opened before (like running the dashboard on a newly installed Metatrader), it may take a few minutes to load the needed data, but the dashboard will load fast in the next runs. You can open the chart of those symbols and switching between timeframes to make sure Metatrader load the history data.
- In the header of the dashboard, you can see which symbol and timeframe is loading to the dashboard. So if you see the dashboard stays on a symbol for a long time, you can open its chart manually and switch between timeframes to download the data for that symbol.
- Run the dashboard with less than 10 symbols and a few numbers of timeframes to make sure it works normal, and then increase the number of symbols and timeframes.
- If dashboard doesn't have enough data for a symbol, and it can't download the data, it writes a message in the "Experts" tab of the "Toolbox" window. You can manually open the chart for that symbols and switch between timeframes to download the data.
- If you set the scanner to load the symbols from "Market Watch" window, checkout the Market Watch window and make sure there is not any grayed out symbol in its list.
- MT4 by default loads too many bars for each symbol on the charts that generally are only useful for back testing, and reducing them speeds up the running of the dashboard. In the Metatrader options, "Charts" tab, you can reduce the "Max bars in history" and "Max bars in chart" options to 5000 or less, then restart the Metatrader.
Please let me know if you think the dashboard needs a feature to help you trade more effectively. I will try to add it to the dashboard if possible and if it is useful for most users.
