Traderji.com - Discussion forum for Stocks Commodities & Forex


MACD Convergence Divergence

Discuss MACD Convergence Divergence at the Technical Analysis within the Traderji.com - Discussion forum for Stocks Commodities & Forex; Hi all, What is divergence? Also, what is positive and negative divergence? how to interpret ...


Go Back   Traderji.com - Discussion forum for Stocks Commodities & Forex > METHODS & STRATEGIES > Technical Analysis

Technical Analysis Discussion of all the principles involved in technical analysis.


Reply
 
Thread Tools
  #1  
Old 30th January 2005, 07:22 PM
Member
 
Join Date: Oct 2004
Posts: 49
Thanks: 0
Thanked 0 Times in 0 Posts
gopu is on a distinguished road
Default Divergence

Hi all,

What is divergence? Also, what is positive and negative divergence? how to interpret this divergence with MACD and Moving Averages?

Please clarify.

Regards

Gopu



Reply With Quote
Sponsored Links
  #2  
Old 30th January 2005, 07:41 PM
Member
 
Join Date: Mar 2004
Posts: 690
Thanks: 0
Thanked 29 Times in 23 Posts
sh50 will become famous soon enough
Default Re: Divergence

This has more to do with trendlines than moving averages/macd. When trendlines of prices and indicators point in different directions there is a divergence. There are of two types- positive and negative.

When the indicators make a higher high but the price does not it is positive divergence . The price could be horizontal or be sloping downwards.

Similarly for negative, indicator makes a lower low but price does not.

I remember from indicator's perspective- when it is positive, divergence is positive and vice-versa. It is better if positive divergence is in oversold area and negative divergence in overbought area.

Each positive and negative is of three types which can be better explained with diagrams.

One can look for divergences between prices and MACD histogram, RSI, Stochastics etc.

A real pro can comment better

Last edited by sh50; 4th February 2005 at 06:35 PM.
Reply With Quote
The Following User Says Thank You to sh50 For This Useful Post:
vmonu (28th May 2010)
  #3  
Old 1st February 2005, 08:53 AM
Super Moderator
 
Join Date: Jun 2004
Posts: 1,778
Thanks: 2
Thanked 785 Times in 126 Posts
Traderji has disabled reputation
Default Re: Divergence

Oscillators are most useful and issue their most valid trading signals when their readings diverge from prices.

A bullish divergence occurs when prices fall to a new low while an oscillator fails to reach a new low. This situation demonstrates that bears are losing power, and that bulls are ready to control the market again--often a bullish divergence marks the end of a downtrend.

Bearish divergences signify uptrends, when prices rally to a new high while the oscillator refuses to reach a new peak. In this situation, bulls are losing their grip on the market, prices are rising only as a result of inertia, and the bears are ready to take control again.

Types of Divergences

Divergences, whether bullish or bearish in nature, have been classified according to their levels of strength. The strongest divergences are Class A divergences; exhibiting less strength are Class B divergences; and the weakest divergences are Class C. The best trading opportunities are indicated by Class A divergences, while Class B and C divergences represent choppy market action and should generally be ignored.

Class A bearish divergences occur when prices rise to a new high but the oscillator can only muster a high that is lower than exhibited on a previous rally. Class A bearish divergences often signal a sharp and significant reversal toward a downtrend. Class A bullish divergences occur when prices reach a new low but an oscillator reaches a higher bottom than it reached during its previous decline. Class A bullish divergences are often the best signals of an impending sharp rally.

Class B bearish divergences are illustrated by prices making a double top, with an oscillator tracing a lower second top. Class B bullish divergences occur when prices trace a double bottom, with an oscillator tracing a higher second bottom.

Class C bearish divergences occur when prices rise to a new high but an indicator stops at the very same level it reached during the previous rally. Class C bullish divergences occur when prices fall to a new low while the indicator traces a double bottom. Class C divergences are most indicative of market stagnation--bulls and bears are becoming neither stronger nor weaker.

Why don't we make this a tutorial lesson and have all technical analyst (both pros and newbies) post charts with examples of any of these divergence!
Reply With Quote
The Following 3 Users Say Thank You to Traderji For This Useful Post:
karin_jack (28th May 2010), munnabhai208 (28th May 2010), vmonu (28th May 2010)
  #4  
Old 1st February 2005, 03:48 PM
Member
 
Join Date: Oct 2004
Posts: 49
Thanks: 0
Thanked 0 Times in 0 Posts
gopu is on a distinguished road
Default Re: Divergence

Dear Traderji,

What does it mean Oscillators?

Regards
gopu
Reply With Quote
  #5  
Old 1st February 2005, 04:04 PM
Super Moderator
 
Join Date: Jun 2004
Posts: 1,778
Thanks: 2
Thanked 785 Times in 126 Posts
Traderji has disabled reputation
Default Re: Divergence

Oscillators are technical analysis indicators that fluctuate beween a mid point or mean.

A good example of technical analysis oscillators are RSI, Stockastics, ROC, etc.
Reply With Quote
  #6  
Old 2nd February 2005, 12:30 AM
CreditViolet
Guest
 
Posts: n/a
Default Re: Divergence

Hi gopu
Divergences are very crude way of using oscillators.If you have spent time watching intraday charts you would have noticed tht momentum indicators will show divergence for a while and suddenly those divergences vanish as price breaks new territory.They are basically hindsight tools.Divergences sit pretty in hindsight agonizing how u have missed the top.However they get erased out quickly if price moves quickly in the opposite direction.And thts why u will never see a failed divergence when u look back at charts.Seems very simple but very much overlooked.
Crossovers(right hand particularly) are better use of momentum osc. like stochastics

Cheers
CV



-------------------------------

"Trade what you see not what you think and definitely not what others think
Reply With Quote
The Following User Says Thank You to For This Useful Post:
vmonu (28th May 2010)
  #7  
Old 2nd February 2005, 01:06 PM
Member
 
Join Date: Aug 2004
Posts: 104
Thanks: 0
Thanked 1 Time in 1 Post
andy is on a distinguished road
Default Re: Divergence

Oscillators are most useful and issue their most valid trading signals when their readings diverge from prices.

Divergence is a key concept behind many signals for oscillators as well as other indicators. Divergences can serve as a warning that the trend is about to change or set up a buy or sell signal.

To improve the robustness of oscillator signals, traders can look for multiple signals. The criteria for a buy or sell signal could depend on three separate yet confirming signals.

A buy signal might be generated with an oversold reading, positive divergence and bullish moving average crossover.

Conversely, a sell signal might be generated from a negative divergence, bearish moving average crossover and bearish centerline crossover.
Reply With Quote
The Following User Says Thank You to andy For This Useful Post:
vmonu (28th May 2010)
  #8  
Old 4th February 2005, 05:41 PM
Member
 
Join Date: Mar 2004
Posts: 690
Thanks: 0
Thanked 29 Times in 23 Posts
sh50 will become famous soon enough
Default Re: Divergence

In addition to what Andy has mentioned which are the immediate issues one can look alongside divergence, one can also look for price pattern breakouts, trendline violations, break of previous supports/resistances. Basically, the thing to remember is tha chart is more important than any indicator indication be it divergence or whatever.

While the indicator may give you a good head start
In the overall scenario, it plays a minor part
For the ultimate execution, you have to depend on the chart
Giving too much attention to indicators is placing before the horse the cart
Always remember Technical analysis is less of a science, more of art.

Last edited by sh50; 4th February 2005 at 05:53 PM.
Reply With Quote
The Following User Says Thank You to sh50 For This Useful Post:
vmonu (28th May 2010)
  #9  
Old 4th February 2005, 05:46 PM
Member
 
Join Date: Mar 2004
Posts: 690
Thanks: 0
Thanked 29 Times in 23 Posts
sh50 will become famous soon enough
Default Re: Divergence

I posted the above twice by mistake. I don't know how to delete it. ( Traderji, please guide). I might as well add:-

In addition to divergence
One has to apply one’s intelligence
With diligence
To see at the unfolding price emergence
To see how charts and indicators combine in overall convergence
In this respect if there is negligence
It can only lead to trading indigence
Lets sum it up," Chart action is supreme" in technical parlance.

After writing the above, I bumped into something interesting by Well known TAnalyst Vijay Bambwani," The chart is the meat. The indicator is the ketchup. The indicator is the derivative of the chart and not vice-versa. "

Last edited by sh50; 4th February 2005 at 06:33 PM.
Reply With Quote
The Following User Says Thank You to sh50 For This Useful Post:
vmonu (28th May 2010)
  #10  
Old 4th February 2005, 08:54 PM
Member
 
Join Date: Jul 2004
Posts: 564
Thanks: 0
Thanked 7 Times in 7 Posts
jaideep is on a distinguished road
Thumbs up Re: Divergence

Quote:
Originally Posted by sh50
.........."The chart is the meat. The indicator is the ketchup. The indicator is the derivative of the chart and not vice-versa. "
I'd say YEAH!! to that. 'Tis one one thing I understand for whatever little I comprehend. T/A is awesome but this one thing is absolutely 100% basic.


Reply With Quote
Reply

Bookmarks


Advertise Here


Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads for: MACD Convergence Divergence
Thread Thread Starter Forum Replies Last Post
MACD - Moving Average Convergence Divergence Traderji Technical Analysis 11 21st February 2013 02:35 PM
Divergence Questions hagadol Technical Analysis 2 27th April 2011 10:45 AM
need clarification gopu Technical Analysis 12 24th April 2011 01:44 PM
Macd Masterchief Technical Analysis 6 22nd March 2010 11:37 AM
Metastock - missing MACD histogram cmlee MetaStock 3 24th February 2005 08:24 PM


All times are GMT +5.5. The time now is 12:17 AM.

Indemnity, Disclaimer & Disclosure Notice:
• By visiting Traderji.com you automatically indicate that you agree to our Forum Rules, Indemnity, Disclaimer & Disclosure Notice and General Content Disclaimer Notice and indemnify Traderji.com, its associates and related parties of all claims howsoever resulting from the usage of the forum/site.
• Disclaimer: Trading or investing in stocks & commodities is a high risk activity. Any action you choose to take in the markets is totally your own responsibility. You are recommended to make appropriate enquiries and seek appropriate advise before sending money, incurring any expenses, acting on recommendations or entering into any commitment in relation to any advertisement published here. Traderji.com does not vouch for any claims made by the advertisers of products and services. Traderji.com will not be held liable for any consequences in the event such claims are not honoured by the advertisers. Traderji.com will not be liable for any, direct or indirect, consequential or incidental damages or loss arising out of the use of any information by anybody mentioned anywhere on this site.
• Disclosure: The information in this forum is neither an offer to sell nor solicitation to buy any of the securities mentioned herein. The writers may or may not be trading in the securities mentioned.
• All names or products mentioned are trademarks or registered trademarks of their respective owners.
General Content Disclaimer Notice:
In light of our policy of encouraging candid, open exchanges of views and the rapid distribution of information originating from many sources, Traderji.com cannot determine the accuracy or legality of any information that may be uploaded to the forum. Opinions, advice and all other information expressed by participants in discussions are those of the author. You rely on such information at your own risk. You are urged to seek professional advice for specific, individual situations and not rely solely on advice or opinions given in the discussions. Since Traderji.com is an open and free discussion forum, any comments made by members of this forum in their posts reflect their own views and not of the owner or administrator of Traderji.com. Thus the owner/administrator indemnify themselves of all claims whatsoever and will not be liable or responsible for any members comments/views in this forum Traderji.com. Although we constantly delete all irrelevant content and/or SPAM, if you should find any objectionable or offensive posts made by members of this forum which you would like to bring to our notice for removal then please Contact Us.
 


Copyright © www.Traderji.com 2001 - , All rights reserved.

Recommended Websites - www.TradersEdgeIndia.com - www.TradingPicks.com - www.MasterOfTrading.com

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247