in this article i want to share the way I use divergence, thought in a particular way

Fundamentals

My personal preference to find this opposite is stochastic
I simply use it to understand if the market doing something opposite than the indicator is telling me to do
When it comes to guess we want to plot areas where the indicator and the price are not lined up



On this chart we have a high area making a lower high, on the indicator we have a high practically making a slightly lower high
It is practically the same thing




On this one we have a high going down to a lower high, on the indicator the trend is going high
How to connect?
The way I do it is: in an uptrend, if the market is recently going up wards, and it coming to come back down we want to connect our highs
In an uptrend i connect my highs
In a downtrend I connect my lows
These opposites basically indicates that is market is getting ready for an inverse

What is the best way to figure out where the opposite actually occurs?
I put a horizontal line in the area we are going to plot the high from and o horizontal one in the same area in the indicator


Has the line ever bean breach?
And I do the same thing with the indicator has the line ever bean breach
Once I see the breach happen that’s when I know an opposite is goanna happen which means that the market is probably getting ready to turn around at any moment so I stay on alert



Here we have a downtrend see how market is going downtrend so i connect my lows
it’s pretty much flat on the price, and down on the indicator, it’s not saying the same thing it’s not opposite either, so this is why it is not too strong
These things are really powerful to look at and when it comes to term to finding out the flow of market to see where we are going and if we are ready for a reverse and when we mix this out with our original understanding of the market where the market is heading they are extremely powerful

Let’s go to a high level

the divergence is just like any other indicators, it is highly used, which means 95% of the market uses it, and if 95% of the market uses it, it won’t work.

Here is the thing, what most people fail to understand is if I’m going long and 95% of the people in the market are going long, what are the operator of the market doing, are they moving the market down?
if that’s the case, if I’m thinking that I should go long and instead I go down I still lose, my objective is not to do opposite what everybody is doing the objective is keep and still in the gain

We want to buy at this point


So we want to learn the psychological aspect of the market
What is actually going on?


when i see most people going long at point A
This is the area where everybody notices this is a divergence and says I want to go long because I see an opposite thing happens and I don’t want to be selling any more I want to go long

what happens is these people who go long must get out of the way, chart move down hold the stops out and then it starts to go up and when we look back we notice that the opposite actually did work we just enter in the wrong area and we always end up blaming ourselves

Why are people going longer?
We see in the area “A “people are going longer we see that the buyers are building up

Second thing: in the 1hour chart



See these are the same areas where the indicators says over sold many automatic trading systems many strategies were getting ready for a long at the area “A”, they have to be killed they have to be get out of the way for bigger traders, this doesn’t mean simply taking them in the opposite direction but taking them in opposite direction temporarily and then take it north,
Because even when you take the opposite direction temporarily breakout traders are selling at “B” point when the market is going short
You know, we’ve all heard about breakout traders they leave out of these stuffs when the market goes short they sell but for how long they are going to be in? It’s only a matter of time they will also crush
If we understand the psychological aspect of divergence and we use our price action techniques such as opposite or any other thing they can actually be quite powerful

So what should we do?
At the moment when we see divergences immediately happen in a live market wait don’t just jump in immediately, look for confirmation, and then wait for the killing to happen or for the stops to be taken out
If it looks like there is a divergence there is a support/resistance there and there is a price action confirmation, remember it is not just you looking at it like that it’s everybody looking at it because that’s how we are trained, just imagine if you are the larger player and know this information what would you do ? You have to find the way to take this people out
so always thing of it in terms like that don’t thing of it this is how I’ve learn this is going to work the chances are the way you learned it everybody has learned it and what is popular is does not necessarily work
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