Complex trading system #3 (MACD Divergence)

Thank you Mr.Edward

Here is the MACD divergence indicator.
For the best effect, place it on top of the regular MACD in MT4.

FX5_MACD_Divergence_V1[1].1.mq4

Best regards,
Edward

Any EA or Indicators for the strategies?

Wanna trade divergence like a pro?
Check out this guide for MACD divergence
A guy there is giving almost a ready strategy of entering with MACD divergence and MACD histogram.

"The only ones making profits on it, is the mafia(brokers, banks, and forex systems vendors), i am tired in loosing in this financial jungle. i am in bankruptcy, with high credit cards debits"

It looks like somebody was so stupid not keeping a good money managment and using a method like scalping. Next time, do something better ...

The only ones making profits on it, is the mafia(brokers, banks, and forex systems vendors), i am tired in loosing in this financial jungle. i am in bankruptcy, with high credit cards debits

Hi,

Here is a video from Mark McRae on divergence with Stochastic. It can be applied to MACD as well. It adds up to previous explanations using EMA crossover, trend lines and support/resistance.

Chamane

It works both ways, but most of the time it is price peaks then MACD peaks.

Regards,
Edward

Hi I have a question on divergence. Do you see a peak to peak on the actual price then you check if there is divergence on MACD? Or do you do the reverse; that is 2 tops on MACD then see if there is divergence on price? thanks

Hi Edward,

Thank you for your advise may the Almighty God bless you RICHLY in your life.

Thanks
ITA

Hi ITA,

Out of all indicators, MACD leads in terms of quality and early delivering of the signals.

Using the custom indicators you've shared:
If you look at MACD divergence, you’ll see two types of lines: solid and dashed.
Solid lines suggest trend reversal while dashed lines – trend continuation.

Now, example 1:
when we have a solid red line – this means an uptrend is probably about to reverse, and we want to Sell.
To set up a trade, we will first draw an uptrend trend line and then Sell on the breakout of that trend line,
which will be a confirmation of a trend reversal, suggested earlier by MACD divergence.

How to draw a trend line for every particular divergence case?
I’d recommend first of all adding Fractals indicator (it is available in every MT4 platform under Williams indicators).
We look for the last 2 bottoms = last two fractals contained within the divergence range
and connect them making an upper trend line. Entry is made on the break of the trend line.

For dashed lines it is another story. Dashed lines suggest trend continuation.
The best way for the price to confirm trend continuation is to break previous horizontal support/resistance level.

Therefore, example 2:
we have a dashed red line – which tells us that a downtrend is probably going to continue.
All we need to do is look at the lowest bottom = lowest swing low = lowest fractal contained within the range of
that dashed signaling line, and then draw a horizontal support line through it. If price breaks through that line –
we’ve got a real trend continuation and a Sell trade in place.

Alternatively, we can add my favorite 9 EMA and whenever there is a dashed line = trend continuation,
we enter a trade as soon as a price bar closes on the other side of 9
EMA (take a look at trading method #1).
However, with such entry, until price hasn’t passed its horizontal support/resistance level, that I talked about earlier,
you have to babysit your trade with a trailing stop.

Your stops and profit targets for 4h and especially for daily charts are too tight.
I’d suggest testing in between 50-60 pips TP and 30-35 pips SL for 4 hour charts and 80-90 pips TP and 40-50 pips SL for daily charts.

Best regards,
Edward

Hi Edward,

My Problem is on False signals.
i trade the divergence on three timeframes 1H, 4H and D1 and it is an alert signaling me that a divergence is about to take place.

i open an order when Signal alert me on any of the timeframes( 1H, 4H and D1)
Also placing my required Take profit and Stop Loss (for 1H 25pips TP and 25pips SL, for 4H 30pips TP and 25pips SL, for D1 60pips TP and 30pips SL.

So most of my trades i have false signals ( it hit my stop loss ).
Please i need your help Edward.

Thanks
ITA

Hi ITA,

I like divergence trading too.
I'll have a look at the indicators this week.
Could you please add few more words on what exactly troubles you most: false signals? exits? anything else? so that I have a clear idea about the tasks ahead. Thank you.

Best regards,
Edward

hi Edward
Please help me, i love divergence trading it.
but my problem is i have an indicator that alert me on bullish and bearish divergence with also draw lines on both price and oscillators. sometime when to alert me i either gain or loss my Take Profit 25 in 1H,30 in 4H and 60 in D1 for Stop Loss 25,25 and 60 respectively.
so am giving you this software to test it and summary it then correct it if you can. they are four in number and then a picture to see how the indicator is place.

ADX_Trend.mq4
FX5_Divergence_V2[1].1.mq4
FX5_MACD_Divergence_V1[1].1.mq4
Stochastic_DivergenceMTF.mq4

thanks ITA

Interesting point. I always treated divergence phenomenon the way I described it in the rules and even a flat wave pattern (the first example) is treated as a divergence, since indicator shows less interest in favoring bear side, while price pulls lower to match the previous low...

Thank you for your notes, I liked your comments about correct and failed divergence.

To user that was asking about additional filters, it is worth taking a look at trend lines, which can be used as confirmation and triggers on the pullback.

Best regards,
Edward