To Diverge or not to diverge?That's the question...

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Hi all,

This is my first thread in forex-tsd...First i want to thank for all moderators and members of this forum beacuse of this forum ...English is not my native language..So i want to say sorry oof the beginning for possible misunderstandings...Newbies that are members of this forum are just lucky i have to admit it...Beacuse there a lot of junk inofrmation in the world of forex..If a newbie graduated from babypips school of pipology they can master theirself in here with a lot of useful informations...Anyway i learn a lot from this forum hopefully i want to contribute a little..I don t know it maybe not new but i try my chance...

Till in the beginning of my trading career this divergence phenomen attract my attention a lot...And still it keeps it..As some of you already know trading strategies somehow perform good and and suddenly then failed..We don t know why they are perform well some time and then failed..I think it is just beacuse of divergence..I know divergence is subjective case...People need limits when thinking an idea...Our brain need some limitations for defining...So if we limit somehow divergences i think we can come closer to solution..

I want to discuss about divergencies in this thread...All Whys,Whats,Hows about divergencies...I got some ideas about it..I will share it for sure but first i want to hear your opinions about it..

 

I think thread name was a good choice beacuse noone wants to talk about it ..For me it is a really important subject..almost most important one in trading...anyway mates good luck and have plenty of pips..

 

Problem with divergence is that always happens after the fact

 
techmac:
Problem with divergence is that always happens after the fact

Thnx for the post..You are right that we should define to define divergence first..For me it is a leading indicator..I mean you are right we can only come clear conclusion after the fact like price action but this way we don t have any benefit through of it...I am talking about measuring the possible clear(i know it sounds dumb but hope i am clear enough) risk through divergence...

I think its shadow of price action,sometimes it can lead like it depends on the source of light and the subject' path(i mean TREND), if we can find a proper way to use it..For ex If source of light at south and trend goes up now shadow should be infront of trend...What i am trying to tell is we should try to define it as a leading indicator not a lagging one if we want to use it..

I want to hear your opinions about what makes divergence?i mean what are the reasons that cause divergence?

For me there are two reasons that cause divergence one is correlation and the other one is volatility..But i am not sure is that all?

 

My main problem with divergence is that it is too subjective for my taste.

It is easy for a naked eye to spot it, but only because we are able to approximate much better then the machines are. And then, when it comes to explining it to myself it ends up in : "Well there are two peaks here, there are two peaks at approximately same place here, and now they diverge" or similar.

In my opinion the main reason for divergence is a momentum change (not a trend change) and it is a warning sign rather than signal. In sme situations the intuitive divergence spotting saved my but (like some EURUSD peaks and valeys that were disaster for some) but I still can not explain to myself if there is a reason for a divergence. Two equally "fast" (or "slow") things should be compared to have accurate divergence, but that is unlikely ...

 
A couple of divergence indicators
 
If traded properly Divergence could bring you consistent profits. A plus is the fact that as you are usually selling near the top or buying near the bottom , thus the risk on the trades is small relative to the reward which you might obtain.
 
I liked the thread name too :) it is catchy
Agree with bonifaas_abe that it could bring you profits. These are usually reliable signs that the price of an asset may be reversing. Just pay attention to the chart and you will see it, otherwise you could always use indicators. They could help too.
 
There are many strategies that are include in Forex Trading, you need to select an appropriate one for the appropriate market situations.
 
Greetings,
The divergence appears often, but it is not the only one thing needs to watch before taking decision for trade. Nevertheless if it confirms the expectation where market will go further, then would be helpful :)
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