You are confusing him. By definition what he is talking about is THE divergence. Whether it is reliable or not is a different thing and pretty much subjective. That's why you may want to use other ways to filter out weak divergences, but that does not change the fact that what is is talking about is the divergence. In fact that was his only point...
I'll try this again. Divergences in an oscillator are completely irrelevant when the vehicle is trending. If you want to trade divergences in something that's trending, then use a trending indicator. There can be multiple "THE" divergences when you're applying an oscillator to something that's trending.
dbphoenix, is absolutely correct and many traders really should sit down and try to understand the difference between the MACD Histogram and the MACD Signal Lines when applying them to divergence trade signals...Long or Short... There's a huge difference in using the MACD histogram for divergence signals all by itself (not recommended)... http://www.elitetrader.com/vb/attachment.php?s=&postid=405272 in comparison to using the MACD Signal Lines (better chance at a successful trade than via the MACD Histogram) if using such all by itself with no other confirmations. http://www.elitetrader.com/vb/attachment.php?s=&postid=405288 NQ was in a very strong uptrend ever since about 0939am est until 1321pm est. Very tough trading to try and apply a MACD Histogram bearish divergence in such a trend...waiting for a bearish divergence in the MACD Signal Lines would have increase the odds for a successful outcome in comparison to the MACD Histogram... based on using them all by themselves. As for confirmations to the MACD if your into indicators... try looking for Stochastic being overbought when a bearish divergence appears within MACD Signal Lines... http://www.ttrader.com/mycharts/display.php?p=18091&u=intradaystrategies&a=Trade Analysis 201&id=433 http://www.ttrader.com/mycharts/display.php?p=18092&u=intradaystrategies&a=Trade Analysis 201&id=433 Try anything except for using the MACD Histogram all by itself...tough to make consistent profits that way. Note: The above application of the Stochastic was mentioned to me by an online trading pal in a chat room... The theory is to apply it only on a strong trend days which is confirmed by the MACD Signal Lines rising strongly upwards until they begin showing signs of exhaustion when they begin declining. jrs3, your obviously into intraday Japanese Candlesticks via another thread you recently started... I recommend you combined candlestick analysis as a confirmation tool if your going to use MACD Histogram or MACD Signal Lines in divergence trade setups... to increase your odds for success instead of concentrating on MACD Histogram all by itself which in my opinion is not a good indicator for divergence signals on a trend day... As dp mentioned...use a trend indicator for trend days. Have a nice weekend all and trading was good this week... http://www.elitetrader.com/vb/showthread.php?s=&threadid=26678&perpage=1&pagenumber=7 NihabaAshi
I hear you DB...... I wasn't referencing my comments to you or accusing you of negligence for not going further. Just thought I'd add something to the tread. You have to give in order to receive.
I thought I would make my post in this thread since it already has the attention of people who appear to be kindly offering their suggestions. Today was the first day in quite some time in which I actually took a bath on ES; essentially I got caught long at the end of the day. I stubbornly and stupidly refused to believe that the S&P would sell off to the degree it did, and since my IT line had not broken as of 13:50 (CST) or so, I held on to my detriment. I got greedy since I was up 5+ points or so by 13:40, and when that 5 minute bar (13:40) closed higher, I wrongly thought it was heading north and I admit I am guilty of trying to catch a bottom that was not there. I know this is a cardinal sin and I paid for it. My indicators were starting to give me clear signals to get out (don't tell Jack) and/or reverse subsequent to this, but I was drunk from my success over the last 2 weeks of a moderate to strong uptrend, especially given the almost daily end-of-day rallies, so I held on... Two questions: One: there was some odd price action on the 5 minute chart at bars for 12:55, 13:00 and 13:05, in that there was some selling well below the average trading range of the bar. If one looks at the t&s from these 13:00 for instance, you see a series of trades at 1127 taking place, and then a single trade (or possibly more as I have a >= 10 contract filter on my t&s) of 15 contracts at 1124.25, then immediately afterwards a series of trades at 1127.25, i.e. the trades resume back to the "normal" range of the bar. Price action like this happened in all three aforementioned bars. What is happening here? Who might be selling and why are they selling at so far below bid? Is this a warning I could take note of if I see this again that there might be an agressive sell-off forthcoming? Two: I think in retrospect, my biggest error today (other than not following my indicators and second-guessing the market b/c I was too getting cocky/greedy!), was too not pay enough attention to Arms/Trin. Clearly for most of the day it was above 1.3 which is pretty bearish. I know the trin is the ratio of advance/decline ratio to the up volume/down volume ratio, but in all honesty, I never was clear on the calculation of this final number. In attempting to break down the meaing of the trin, it appears that if there are more declining equity issues on higher volume, one would have an overall ratio of a lower number numerator and a higher number denomonator which would be as a result in a lower number overall: like this: low advancing issues/high declining issues ----------------------------------------------------- higher total up volume/lower total down volume Since it would seem to me that we had higher declining issues on higher volume today, we would have had a lower number, but obviously there was not. What don't I understand here? And if there is positive price action in ES with a very bearish Trin (an equity indicator), what exactly is taking place? I lost all my gains plus a little more which compelled me to stay in this Friday night to do some homework. I would appreciate any answers db or electron or whomever might give me...please be kind.
Right after lunch time there were crazy wide swing ticks in eSignals chart, many of us stay flat because of that. May be that's why the volume was low. After that selloff happened according to Briefing news: 15:21 ET Traders attributing late price drop to sell program on S&P triggering stops, as well as put buying by tier-1 firm :
First, those times you mention were bad ticks on the ESignal quote system. Those trades did not actually take place. I use ESignal, so the quotes were quite confusing. However, I also watch the market depth window provided by IB for the ES. This did not show the erroneous quotes. Originally I started watching market depth to see if it provided any clues as to direction, and to provide a check on timeliness/delay of quotes. I have not seen these types of "out trades" in the past in the ES on ESignal until the first one I noticed between 3-3:15PM CST. This was later corrected in the charts. The next event I noticed was today in the several instances you point out in both the ES and NQ. Obviously they have no meaning since they are false ticks. In terms of trin, most of the day on the NYSE we had more advancers than decliners. Not sure where you got the impression that there were more decliners.
I don't know where you entered your long ES trade, but you should use an initial stop and then a trailing stop as price moves in your favor. I'll let you figure out where to place your stops, but they should be at a logical point such as below a dip like the one at 11:40 am CST. Keep it simple. When you are in a position and the fear/greed demon has you in its grip - you can't be looking around trying to figure out other indicators like trin etc. Trail your stop and stick with it (enter it in globex and adjust it when necessary).
Sorry about that, I hit my submit button by mistake. The advancers versus decliners showed steady improvement after the lower opening, and went positive after the first hour (on the NYSE). We did not go negative until late in the day, just before the close. So the first thing to notice is that in terms of the trin calculation is that the advances/declines is greater than 1 for most of the day. If volume had been reasonably equivalent then the trin would have been around 1 as well. But in this case, declining volume exceeded up volume all day, thus this calculation is less than 1, thus making trin greater than one all day. I did not make a study of WHY declining volume was greater, but what was clear was that some important stocks were down all day. For instance, IBM, WMT, GE, GM. RD (Royal Dutch) was down on 20 million shares. SBC was down on another 20 mm shares. In fact, the important stocks that were negative all day was enough to have me on the sell side today. Trin was really not a factor. And the A/D was positive for most of the day. OldTrader