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Spot tops and bottoms with the Trading Alchemy Ultimate Divergence Indicator

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  • Spot tops and bottoms with the Trading Alchemy Ultimate Divergence Indicator

    Divergence occurs when an oscillator such as the RSI, CCI, MACD or Stochastic is giving you an indication as to the direction that is different from the direction that price is moving. For example, price is heading higher and the oscillator is heading lower, in which case the higher price is not confirmed by the oscillator, indicating a weakness in price and that a price reversal may be eminent. With the Alchemy Ultimate Divergence Indicator, all the difficult and tedious measuring is done for you in a very visual and consistent manner. This allows the trader to concentrate on possible trade set-ups and trade confirmation signals.

    Some of the unique features of this indicator are:
    Detect divergence between price and any specified oscillator, between 2 different price series or between 2 specified oscillators.
    Being able to specify the minimum and maximum number of bars in between price pivots.
    Being able to specify the minimum price distance between the 2 price pivots as well as separately, between the 2 oscillator pivots.
    Being able to specify the maximum number of lagging/leading bars between price and oscillator pivots for associating the price pivot with their corresponding oscillator pivot.

    We integrated more advanced display features as follows:
    The divergence can be displayed as show me dots above/below price or it can be plotted as oscillator with its corresponding divergence dots.
    Either, divergence pivot and previous pivot that the divergence is measured from can be displayed and the indicator can connect the 2 price pivots with trend lines.

    For chart examples, please go to http://www.tradingalchemy.com/ViewCh...genceindicator

  • #2
    I know trader get nervous around new highs especially day after day. How can they predict when a market may or may not run out of steam? seems to me that using volume OI and other factors may just give some insight on the legitimacy of these never ending up days. As the old adage goes the trend is your friend until the market says otherwise. thoughts?

    Comment


    • #3
      Divergence is one of the signals that price may reverse, however, as you pointed out, in a trending market, divergence signals may not be as reliable since price tends to keep moving into the same direction even though the oscillators continue to get weaker and weaker. This is why we like to combine our divergence signals with important support and resistances. When divergence is signaled as the market approaches important support and resistance levels, it confirms these levels and makes for a much more reliable reversal signal. For displaying supports and resistances, we use our Alchemy Pivots Indicator and our Alchemy Multi Floor Traders Pivot Points Indicator

      Comment

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