Discussion of article "A New Approach to Interpreting Classic and Hidden Divergence. Part II"
I apologise to those who will try to take the EA algorithm as a basis. I was confused by the result I got. I was in a hurry to submit the article to the editorial office. The algorithm is not correct. I will not explain it. I will leave it to those who think. Specifically, a series of articles is being prepared for publication, where the concept of technical analysis will be revised. New tools will be used there. ADX was the most suitable for the article at the moment. If I would have introduced new algorithms for calculating indicators and systems of their analysis, the moderator would not accept the material in principle. If there are specific questions I will answer. Don't be the type of "why the market is Close, and indicators are different. Yes, my fault. I went to the wrong end. You will hear the answers to all these questions and possibly other questions that will arise in the future.
If we take H4, almost every few candles there is already a divergence. Depending on what indicator/oscillator you throw on and with what settings. If you take more candlesticks, then after several months of continuous looking at the monitor, without any indicators, you start to see these diverges. I know two variants of diverters trading, one is closer to the classics, the other is mine.
1. When detecting a divergence (the beginning of the divergence of price and indicator), you should not wait for the end of the divergence formation and the signal to enter (it's too late), but place an order on the maximum/minimum, which was formed at the moment. If you look at it from the outside, it seems silly to place an order and wait for a reversal, the order can catch, and the price will continue to move in the same direction. If we open in the course of price movement, what does the divert have to do with it? Let everyone think for himself )).
2. We adjust the indicator in such a way that it shows as few signals as possible. The point is that no matter where the price goes, after the signal appears, you can enter both BUY and SELL. The main thing is that the price should go exactly, and then you can turn over. There should not be more than two reversals. In fact, there will be three. Why three? It is a custom)).
The theory of impulse equilibrium shows that in fact divergence is a consequence of imperfection of algorithms of traditional indicators.
In particular, due to the lack of a mechanism to take into account non-stationarity in the form of constantly changing frequency of price fluctuations.
Nice article Alex.
Had quick read, will go back and read again (and again..) to absorb.
Much appreciated, regards, Paul
Thank you so much, Alex,
I reread your article many times to try to understand your ideas. Only a little regret is that I cannot translate this article into Vietnamese to increase knowledge for traders in my country, because of copyright issues.
Jewel
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New article A New Approach to Interpreting Classic and Hidden Divergence. Part II has been published:
The article provides a critical examination of regular divergence and efficiency of various indicators. In addition, it contains filtering options for an increased analysis accuracy and features description of non-standard solutions. As a result, we will create a new tool for solving the technical task.
We can check these ideas by creating a small robot. We are not interested in the classical variant and in the main line direction. This allows us using the standard ADX from the terminal. Filter will only be applied when the breakout candlestick is too large. For cases when there is no line of an opposite conditional channel where stops could be set, introduce the Stop Loss distance. Also, in the EA we need to set the distance from High/Low. Below are testing results for the main currency pairs: EUR/USD, GBP/USD, USD/JPY over the period from 01.01.2016 to 01.06.2019 at the H1 and H4 timeframe.
EURUSD Н1
Author: Alexander Lasygin