MACD and PRICE divergence

Discussion in 'Technical Analysis' started by nwbprop, Mar 2, 2004.

  1. Currently, I have my MACD set at 5,13,6. I was wondering if anybody uses the divergence of the MACD lines and Price for intitiating trades.

    What i am specifically intersted in is the oscillations of the macd lines compared to the oscillation of price. What i have noticed is that when the macd makes an oscillation lower than the prior osciallation on the same side of 0(neutral) and price makes a new high or low, it signals a reveral. This makes logical sense as the MACD is a momentum(absolute indicator). If the momentum is slower than the previous push but price makes a higher high or lower low. Price is most likely going to reverse after that push. I am not sure what time frame woud be best for this. Right now i am focusing on the 1 min divergence and 5 min divergence. It should work on all time frames in theory if it is a sound strategy.

    I was jsut wondering if anybody else trades this way. My prior strategy is not working as well as i had hoped in these lower ranges and was looking to try something different.

  2. my settings are 8,17,9..... however the important point is that i do not look for divergence on any time frame less than 5 min....and in reality i will not use it to base a trade on anything less than 15 min..... BUT... you are correct... MACD divergence is very useful if not overused.
  3. Larry,

    I appreciate your response. I just had a few questions if i may. Are you using the oscialltions the same way as i described above or is there another way you are using the macd? I can understand you not giving away your system if you dont want to. I applied your macd settings(hope you dont mind) and find them very useful in conjunction with my trading style. Your macd xrossovers seem too correlate to right before my settings make that last reversal oscillation that i was talking about(5 min).

  4. nwprop... no big secret... i use the macd exactly the way that you do... the secret of success IMO using divergence is having it supported by another signal.......AND.... to not overuse it as i previosly stated... it seems the less i use it.... 1-2x a day maximum ... the more effective it is for me... sort of like dieting... the less food you eat.. the more you appreciate what you do eat. good luck with MACD divergence... culrivate the skill of using it... you on right track... just do not use too small a time frame...larry
  5. nkhoi

    nkhoi Moderator

    since it is speed/momentum indicator you can see it reflected in the length of the candle, the longer the candle the higher MACD value and vice versa, eventually you just look at the price and kind of known that there will be a divergent on MACD.
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  6. I can't find this mentioned in Murphy.
    What is its real relevance?
  7. Ditch


    Call the poorhouse, it's full with guys who traded this way:p
  8. I want to go to the poor house.Could you help me on my way,please?
  9. It is a poorhouse way to trade. The key is having the big picture "context" and when the signal is worth taking and when it isnt.
  10. manz66


    Traders International. They sell a method for $4,000, where macd and stoch divergence from the price to pick 2 points or less in es. But, one of the members of ET had revealed the method here. Good luck finding it.

    The idea is do not go for home run, just go for base hit and never give up profit. Also, when you are using divergence, there has to be enough volatility, so use atr or std.
    #10     Apr 15, 2004