Excellent example there JJ, nicely annotated as well. Notice how PT @ 1277.50 rocked D who said it pays to be modest?). PT is based on the average price at the time of the first low in the MACD HIST and RSI, if there they coincide.
JJ how many points did you get out of that move. And to answer your question about timeframe. You can use these divergences on shorter TF you just have to make adjustments to your target as well.
A preface to my questions: I use tick charts as I feel they better represent the actual speed of the market and I don't particularly trade off of divergences. So feel free to explain as you would to a complete novice. Would you typically use a 60 min chart for this trade? Seems like you could be waiting for a candle to close only to miss out on a good trade. And if you believe in the fractal nature of the markets, you could realistically look for this particular setup on any time/tickframe. Secondly, and more importantly to me, could you explain more in depth your proft target calculation? The average where the MACD and RSI make the first low? Are we talking the high, open, low, close? Which candles to use for the average? Many thanks.
Believe it or not, I was sitting here bored, and just looking for a decent, technical reason to get into a trade ! I figured it for 4 pts, but since it isn't even in my repertory of setups I was happy (see we ARE emtional beings) with 2 pts. I won't log it in my spreadsheet, (but I'm not gonna give the money back either! ) The most important thing the trade tells me is the market is coiling and bunching, ready to deliver a decent trend trade pretty soon. Later, JJ
I didn't say one can't catch these moves on short TFs, one can trade 1 min divergences for 1-2 points on average. Here is an extract from my recent post on "ES Journal", the joke explains my intention to go longer TF: "Although I still trade short term TFs and consider them to be more exciting/involving if anything, I see your point why positional approach has been the backbone of your trading career. Reminds me of an old joke (probably all heard it as it's as old as dinosaurs turd) Young and old bull chewing grass and notice cows on the other side of the fence, so the young one says to the old one: - Let's quickly run across the field, jump over the fence and f... that cute cow over there... The old bull replies: -Nope, let's slowly walk to the fence, slowly walk through gate and slowly f... all the cows."
No disrespect, but I don't really want to pull this journal into a different direction, you are welcome to PM me or post in my Divergence Journal and I will gladly answer.
Just to add here. That is not a correct assumption. As MACD HIST approaches 0 mark on the second trough and by doing so completing a divergence, that actually signals either a buy or a sell. If you take a signal prior to the completion of a formation, than you should be ready to average in. Also, if you take a premature signal, you have to adjust position size to allow possible price oscillation before (if) divergence is complete. For someone new to divergences I would recommend waiting for a completed formation (or almost complete) and not taking early signals. I will not be surprised to see continuation of this BLD on hourly into tomorrow. I was going to average in on my long position @ 20MA on daily cash index, it didn't quite get there, not to worry.