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Divergence Trading Works

  1. Divergence Trading works and it works better when you look at divergence between price and actual buying and selling volumes rather than divergences between price and indicators derived from price

    For Order Flow Divergence Traders, today, 09/13, was a dream.

    Intra-session there were 2 major tops and 1 bottom, each good for more than 10 points.

    Below are 3 charts that show the divergences between price and order flow that provided prrecise entries at each of these 3 local extremes.

    At a little after 7 PST there was the top shown below w/ith price/order flow negative divergence

    The Next 2 extremes' charts will be posted in the next 2 posts.
  2. Mid-Session 09/13 there was the low shown in the attached chart with attending divergence.
  3. This late session top showed these same divergences and was good for another 10 points.

    Three great divergence trades in one day.
  4. yeah i know it,order flow prorata volume indicator is da best!
  5. Do you work for Pat/UrmaBlume? Are you the banned Pat/UrmaBlume? Or just a really happy subscriber?

    Chart is from the banned UrmaBlume. He's been pushing his wares at TL and now those magical charts show up again on ET.

    Here's the best part -- Pat went on and on @ TL about how his stuff was so great, it wasn't for sale, etc. etc.

    Guess what? Now you can buy the magic for $1400/yr.

    Just the standard 'I got the holy grail for sale' crap. Once again - if it was so good, why on Earth would it be sold for $1400/yr?

    Will you post actual real-time charts or just the pretty after the fact charts that Pat loves to post?

  6. The charts demonstrate patterns that repeat themselves and help me find turning points.

    The pattern in the 1,000 contract contract bar chart shown here with the divergence seems to find at least one trade every day since I have had the software.

    Learning these patterns of divergence is valuable - your stalking and bashing is not. Jealous?
  7. Ignoring the questions once again Pat?

    Aren't you banned from ET?

    Maybe answer the questions instead of just spamming your site.
  8. looks mighty colorful in the nice pictures, but just a little too nice. now show and discuss some of the cases where it fails miserably or is ambiguous and we might pay attention.
  9. You're here to sell things aren't you :( People like make trading 10 times worse for people trying to get into the business. Please go into weight loss supplements or how to buy real estate with no money down course. F***
  10. There are a lot of forums about markets and trading and posts like yours are the reason ET is void of meaningful content as compared to Traders Laboratory or even Big Mikes.
  11. Since you've had the software huh. I'm guessing that was day 1 since clearly you are UrmaBlume from TradersLab with $1400 of colorful indicators to sell that of course look foolproof in perfectly chosen hindsight examples. Nothing worse than a vendor who pretends to be promoting market discussion. That's what folks are tired of.

    Personally, I think you have generated some neat ideas over there but your sly approach to selling indicators and the way you handle any online criticism sickens me

  12. I thought the topic here was divergence trading and the efficacy of using indicators based on order flow rather than price.

    Form over substance kills substance as is plainly evidenced by the dearth of meaningful content by posters like you.

    Could you please reference any post you have ever made on any forum that contains an idea, concept or technology that you authored.
  13. Actually, there is no meaningful content in this topic, just you trolling for new suckers, er I mean customers. Good luck with that.
  14. The 20 minutes before today's close (10/03) in ES showed once again the power of divergences between price and order flow.

    The attached chart, again, shows one negative divergence between Price and order flow confirmed by another. In the next 20 minutes ES dropped 20+ points.

    The topic is Divergence Works. Plus it seems to work better when the divergences are between price and volume based indicators rather than price vs price.
  15. Where there is a divergence on the lower pane?

  16. There are three panels:

    The top is price and the point here is that when price in the top panel was making a new high the the moving window of order flow in the middle panel did not.

    The bottom panel is an indication of the balance of trade and by making a lower high when price was making a higher high - it too produced a negative divergence.

    As price made a higher high the 2 indicators of order flow and the balance of trade made lower highs = double negative divergence between price and order flow. The pattern is quite common.
  17. I mean where did you get the divergence on the bottom pane???
  18. The underlying number is lower on the second high. It may not seem so on the graph but the divergence is there.

    Net New Trade is an indication of net buying and selling volumes. V94 is a moving window of net trade and is much more sensitive than NNT.

    In addition this topping action was further confirmed by the spike in the intensity/velocity of commercial trade shown in the chart below.
  19. Where do I sign up? :p
  20. You do see the one toward the EOD that didn't work, right? Divergences are like every other indicator...sometimes they work, sometimes they don't. It's the trader interpreting the signals that will determine profit or loss.

  21. This divergence WAS at the end of the day - less than 30 minutes before the close. Were you, perhaps, looking at divergence in a price based indicator on a time based chart? Using volume based charts and indicators or order flow rather than price lessens the falst signals and makes the work less subjective.

    The times on the chart are PST.
  22. divergence trading Is a losing startegy, it only works for a few times, then market change and it stops working
  23. You talking about the specific method discussed in this thread or you talking about the methods you've used that didn't work for you that has nothing to do with the method discussed in this thread ?

    If the latter, what type of divergence strategies you couldn't get to work for you. :confused:
  24. Very astute comment wrbtrader, thanks.

    Most barely understand divergences let alone the difference between divergences between price and price based indicators as compared to divergences between price and order flow based indicators.

    Taken in the longer term, divergences between price and the balance of trade can often foretell major moves.

    As indicated in the chart below, in late Feburary both price and the balance of trade made new highs. At the first of May price made a new high and Net New Trade made a much lower high (negative Divergence).

    Over the next couple of months while price clung to the highs the balance of trade showed a steady decline, undermining price. In late July the market broke for more than 200 points in the S&P.

    Movements in price are the effect - order flow/balance of trade is the cause.
  25. One thing I've learned from my Japanese Candlestick discussions with those that said it doesn't work here at ET is that they were either using it without market context, incorrect identification of candlestick patterns, lacking understanding of specific candlestick patterns or using it without a trading plan.

    Thus, I assume such happens with other types of trading approaches. There are those that saids it doesn't work and those that saids it does work. I'm always interested in how the two different groups had been applying the strategy differently.

    Simply, those that say it doesn't work...I want to know what they were doing and then not do the same as them. Thus, I don't want to be part of the majority that couldn't figure it out. Instead, I want to be part of the minority (the few) that did figure it out. That's why I want to go beyond "blanket statements" to allow discussions to get into specific details with chart examples by those that couldn't find a way to make it work while others did find a way.
  26. Today, To many trades, got a little sloppy.
  27. Thanks for posting charts. Its always interesting to see the different ways people approach trading.

    Do you know exactly what information the Net New Trade indicator is giving? Is it similar to a volume delta calculation? The name Net New Trade seems to imply it is somehow able to measure which orders represent new trades as opposed orders closing existing trades or hedging. What is your understanding of what this indicator shows exactly? Or are you using it as a black or grey box?

  28. The raw input to this indicator is a running net of buying and selling volumes.

    "Free trading liquid markets trade in a Price/Time/Volume Continuum that conforms to certain basic dynamics, three of which are defined here:"

    "As Price changes or not and Time passes Volume happens/accumulates.

    As Time passes and Trade/Volume happens Prices change in Direct Proportion to the degree to which that Trade is Imbalanced.

    As Time passes and Trade/Volume happens Prices change in Inverse Proportion to the degree to which that Trade is Balanced."

    We use The Net New Trade and the V94 Window indicator to find the divergences that mark extremes and the patterns of continuation that mark the rest of the leg.

    As NNT is cumulative and V94 is a moving window - V94 is the more sensitive indicator.

    That said, in the chart below you can see that with a lower low in price and a higher low in BOTH V94 and NNT there was a definite positive divergence between price and order flow and as a result of this positive divergence - price broke to the upside.
  29. How many of your 20 trades were via divergence and what was the results of the winners versus the losers assuming some of the trades were not divergence. ???
  30. What does this mean exactly? Is the indicator modifying the running bid/ask total based on how much and how quickly price reacts to bid/ask imbalances?
  31. What about volume weighted average price (VWAP)?
  32. A pattern of divergence between price and order flow based indicators is often present on session extremes.

    Today, 10/06, the best trade of the day was a buy on the session low. The session low was perfectly indicated by the positive divergence between price and indicator V94Window as shown in the attached pic.

    As more and more of these signals are posted one cannot help but notice both how alike they are and how often they repeat themselves at points of opporutnity.
  33. It is amazing how often these same divergences appear on both local and session extremes.

    We find divergences between price and order flow, especially when they are confirmed by more than one time frame, more reliable that divergences between price and price based indicatos such as MACD, RSI and Stochastic.

    The attached chart shows the high of trade in ES on 10/07. This extreme occurred one hour before the open of the day session.
  34. While the low of Friday's trade in ES didn't offer the same opportunity as the high, it still marked a great trade and was well indicatoed by divergences between price and order flow as shown in the attached chart.
  35. i've noticed you use both 5000 share and 8000 share settings in your charts It would seem to me you should be consistent with your settings if you want to be convincing in your arguments for divergence trading.
  36. The divergences I have shown also show up on other charts.

    When there is divergence on a 5k there is almost always that same divergence on the 8k. the problem is I don't know how to attach more than I chart per post.
  37. These divergences/signals work in other markets besides the equity index futures.

    Below is a chart from today's, 10/10, high in the Euro/Dollar future which shows a sudden spike in commercial topping activity as well as a divergence between price and order flow.

    The point is that not only are these divervgences between price and indicators based on order flow more reliable than divergences between price and price based indicators, they also work in the currency futures and other markets as well.
  38. This negative divergence in a higher time frame in the Euro/Dollar Future confirms that in the faster time frame in the previous post.

    These divegences work bettwe as signals when confirmed by more than one time frame.
  39. All I see is false divergences. Just like any oscillator. Everything works sometimes.

    Don't say that, makes it hard to sell indicators for $1400/yr if you point out things like that.

    Divergences are awesome and you can have yours for only $1400/yr if you act now! Operators standing by!
  41. You are absolutely correct Browns.. especially when after a splendid chart of a divergence trade is posted, there is the accompanying actual real money trade record to further add validity! And of course there is a long term daily record of ALL trades to further substantiate this amazing indicator!

    I must be daft to not be sending the OP some private messages on tutoring and the like!
  42. News flash there lightning, when you see negative divergence between price and order flow and then price goes down it is not a false signal it is a divergence signalling weakness and offering opportunity to astute traders.

    In the chart below there as divergence in V94 which is an oscillator and also in NNT which is not and right after the market dropped over 20 points - is that another false divergence?

    Rather than knocking my work, why don't you show us something of yours that is better.
  43. It will be impossible for someone to show you there's something better than your product unless they had access to your product for adequate comparison (testing) to determine which product is better.

    The same is true for you. Thus, it will be impossible for you to determine if someone's method involving divergence is better than your divergence product unless you had access to his/her divergence method. :cool:

    Out of curiosity, can you show one of your divergence signals not working as in resulting as a losing trade via showing on a chart exactly where the entry was and exactly where the exit was at. ???

    The reason why I ask the above question because most traders using any divergence (price/indicator) can "visually" see them without any fancy codes. The problem is the entry price, initial stop/loss protection, trailing stop, profit target and other trade management issues after entering a trade.

    Thus, does this divergence indicator you're using also automatically highlight or tell you at what specific price to enter the trade, where to place the initial stop/loss, trailing stop when trade goes your way, profit targets or is that something that's manually determined by the user ???