EURUSD - Sep2011 - Nov2014 divergences

FX:EURUSD   Euro / U.S. Dollar
2421 29 36
One user said that according to analysts 70% of divergences are fake. I would like to meet those so called analysts.

This is a simple study, with simple triggers. Other time frames have not been considered, otherwise, some of these divergences wouldn't be taken into consideration when using my trading system. Besides this, S&R levels have not been considered either. For the sake of simplicity, the only triggers were blue impulse and bullish or bearish candlestick . Impulse blue means that the color on the Elder Impulse system is blue. EIS             is measuring the direction of a 13EMA and the histogram. That means that whenever there is a down tick or up tick on the histogram, contrary to the prevailing trend, the impulse will become blue, as the 9 day MA on the histogram is quicker than the 13 Ema . There are articles accessible for everyone on the web about this amazing trigger system, and even explanations from it's inventor.

The divergences had a 66% accuracy, and considering the risk reward ratio, the profits would have been much larger. For example, the best divergence had a 7,85 risk reward ratio if the exit is considered the most extreme price on the chart.

Note that this is only theoretical, and I'm not trying to prove how much money you could have made. I am only showing that whoever says that most divergences fail is dead wrong. For this study only 3 years of data have been considered, otherwise the results would have been different, most probably.

Keep in mind : "Divergences are the holy grail of technical analysis". No idea who said that, but he/she was so right!
Divergence on MACD is just a sign of an ending wave. The right question is - what level of the wave is going to the end? :)
Is this EIS indicator your own creation? It looks like a good tool for trader which are using divergences a lot.
for botoms and tops I also us "failure swings".. I underly the RSI on the chart.. and spot divergences on tops and bottoms. It really helps me
No, it's called Elder Impulse system, so it can't be my creation. It's designed to measure momentum, and also helps at confirming divergences. You can find lots of articles on the web.
-1 Reply
Nice done. Could you please tell for how long you've been using it and how effective it was for you money-wise -- I mean, not in particular numbers of course
vlad.adrian mrTylerDurden
I can't give you a straight answer for two reasons. On EURUSD, I have only taken 2 very tiny trades. I have been watching the chart since the start of the current downtrend, before that, I absolutely hated it. It took a while for me to realize that there are trades on EURUSD too.

If we are talking in general, I never take a trade based only on a divergence. I have a whole system and more signals have to be aligned in order to take a trade. Whenever I don't follow the system properly, I loose money.
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I enjoy trading divergences. I think where newer traders mess up is how to properly set R:R with divergence trades. They dont get out of the trade because they continue seeing a divergence. for example i was expecting looking for a chance to add more shorts on a retrace, it never happened.

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jeremyb Technician
For me this divergence is 02-10-2014 >> 11-11-2014 is true,but I'm agree with Technician about the other past divergence, it was not a divergence. What do you think guys about the november divergence vlad adrian "family guy" have find?
Mr Market is going to answer that. He is always write, unlike all of us. You will just have to wait a couple of weeks for your answer
Divergences alone means nothing. You need additional indicators to filter out bad divergence signals.
+1 Reply
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