Thanks for this and all your varied material which I've been working through. They are probably a bit basic but I have two questions on this:
1) when you say that the price went lower with the second example despite the smaller gap between the TS and KS do you mean the depth of price continuing to the downside after the retracement in each case? i.e. the longer two large red candles in the second one?
2) Having spotted such divergences, could you explain how they can then be used / what is the interpretation? In this instance, for example, does it make the whole picture look more bearish?
1. I mean that price in the second bubble is lower than the first
2. Divergence that we talk about is between price movement and price acceleration. The assumption is that for price to reverse, it must:
a. decelerate
b. stop
c. reverse
So divergence is telling us that it is decelerating. So it is like an early warning sign.
Off course it could decelerate and then accelerate again so not every divergence will go trough a,b and c
Great job
Please share your knowledge with us so we can all benefit
At the SSB, the assumption should always be continuation of the original trend BUT the possibility of a move in the other direction is always possible
As for highr TF divegence... it implies a deeper retracement on your current TF
1) when you say that the price went lower with the second example despite the smaller gap between the TS and KS do you mean the depth of price continuing to the downside after the retracement in each case? i.e. the longer two large red candles in the second one?
2) Having spotted such divergences, could you explain how they can then be used / what is the interpretation? In this instance, for example, does it make the whole picture look more bearish?
Many thanks
2. Divergence that we talk about is between price movement and price acceleration. The assumption is that for price to reverse, it must:
a. decelerate
b. stop
c. reverse
So divergence is telling us that it is decelerating. So it is like an early warning sign.
Off course it could decelerate and then accelerate again so not every divergence will go trough a,b and c