For me, divergence is only one of three warning signs that a trend may pause along with other two: price climax and volume spike. I usually spot divergence from price charts, not from indicators. A divergence occures when the last 2 consecutive pivots travels shorter distance or with much shorter time. Divegence can be easily found in any time frame. The reason is that there is only 30% time that market is in trend mode, most time, market simply is in trading mode, the consecutive pivots have no momentum to travel longer. The consequences of a divergence can be price pulls back to mean in a very strong trend (like in LBR's Holy Grail pattern), a flag, an indicator pulls back to zero-line, or has a trend-reversal in a weak trend. In most cases, a divergence only means a pullback, not a trend reversal as most people think. IMHO, this is why so many people got burned with divergence.
i guess what u really wanted to ask is "how do you make money with divergences. be as specific as possible"
i did, also. it is: what value does a divergence really add if you can find one at any time just by changing the indicator's settings or using a different indicator? think about that. how can it add any value if divergences exist at all times depending on the indicator or the indicator's settings?!?! maybe i can put a 6 period CCI on a 5 minute chart and get a divergence. if i adjust the setting to 14, i may not have a divergence. if i use MACD and the setting is 14, 3, 1 and i don't have a divergence, maybe i can change it to 16, 1, 5 and get a divergence. how can this factually help at all?! it may SEEM like it is sometimes, but DOES IT REALLY GIVE YOU ANY BENEFIT WHAT-SO-EVER??
i would question the real edge a divergence entry has if you can find a divergence at any time by changing the indicator's settings. i would say to you, take your exit strategy, then use the same exact exit strategy with your divergence entry AND WITH A RANDOM ENTRY. then see if your divergence entry really means anything!
I can plug numbers into indicators all day long and find some that produce a good signal for a trade or two, there a god knows how many systems out there using the same indicators but with different numbers that will produce different trades. You never rely on the one thing either, its a blend of signals then a judgement before finally taking or skipping the trade. One system will never ever find all possible trades, one guys system might find a trade while the other doesnt..
Same here, since 1999. Do you make money every week? If not, do you make money every month? Just curious where you are along in your trading. Thanks.
yeah, the divergence will just give you the TIMING. if 1 guy trades off a 6 period CCI divergence and another trades off a 12 period CCI divergence, they will probably just be entering at different times. whether they make money or not will depend on their exit. what i'm questioning is if the entry itself adds any type of edge. as i said to nihaba ashi, test these divergence entries against a random entry and use the same exit for both. then see if these indicator divergences really do anything besides trigger a point in time to enter a trade (while also making the trader THINK they're giving him an edge.)