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!
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!
