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Thread: Confirmation Techniques for the Gartley pattern: Divergence

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    Confirmation Techniques for the Gartley pattern: Divergence

    Divergences as confirmation method in harmonic trading





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    I look for divergences, but in a lower timeframe. CD leg is a strong downtrend in the lower timeframe, so I try to figure out where this downtrend is loosing sting with bullish divergences. Then I take this zone as the reversal zone, but I wait for a candlestick confirmation. In this case I wait for hammer, bullish engulfing or piercing pattern.

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    Divergence harmonics Patterns

    Screenshots of how I trade divergence

    Confirmation Techniques for the Gartley pattern: Divergence-gbpjpy-h1-butterfly.jpg

    Confirmation Techniques for the Gartley pattern: Divergence-gbpjpy-h1.jpg

    Confirmation Techniques for the Gartley pattern: Divergence-gbpjpy-h4-2-.jpgConfirmation Techniques for the Gartley pattern: Divergence-gbpjpy-h4.jpg
    Last edited by jaguar; 03-15-2012 at 02:19 PM.
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    We have a 4H Bullish Bat supported by regular divergence on the 4H, to clarify what I mean by regular divergence, the MACD histogram is Negative (Red) then Positive (Green) and then Negative again (NPN regular divergence) I find trading patterns with a combination of both divergence and known S&R lead to high probability trades.

    I have pendings at 80.2, 80.0 and 79.5 with SL at 79.00 TP1 81.75 TP2 84.00 Confirmation Techniques for the Gartley pattern: Divergence-chfjpy-bullish-bat-h4.gif

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    Quote Originally Posted by Robot Trader View Post
    We have a 4H Bullish Bat supported by regular divergence on the 4H, to clarify what I mean by regular divergence, the MACD histogram is Negative (Red) then Positive (Green) and then Negative again (NPN regular divergence) I find trading patterns with a combination of both divergence and known S&R lead to high probability trades.

    I have pendings at 80.2, 80.0 and 79.5 with SL at 79.00 TP1 81.75 TP2 84.00 Click image for larger version. 

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    Welcome @Robot Trader!
    I agree that Divergence is an excellent way for entries/exits on harmonics. Do you look at divergence on the same time frame or higher TF or lower TF?

    Also, do you use Stochastics for divergence at all? I like Stochs especially for Hidden Divergence.

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    What I look for when trading with Divergence

    Quote Originally Posted by duggils View Post
    Welcome @Robot Trader!
    I agree that Divergence is an excellent way for entries/exits on harmonics. Do you look at divergence on the same time frame or higher TF or lower TF?

    Also, do you use Stochastics for divergence at all? I like Stochs especially for Hidden Divergence.
    Hi Duggils,

    Thanks for the welcome

    I look for divergence on the same TF or one TF lower, unless I find hidden divergence (yes stochs are good for spotting this type of divergence) then I will look for regular or continuing divergence on 1 or max 2 TF's lower.

    I have attached a chart showing 1H divergence for GBPUSD from yesterday, there is no harmonic pattern I am just using the chart to show what I look for when trading with divergence. On this chart you will see all 3 indicators are showing divergence, which is a good sign on the smaller TF's also the RSI kissed the 80 level which I consider extreme OB. I have drawn a vertical yellow line showing where the divergence started on the MACD histogram and a horizontal yellow line, when I trade with divergence I expect a high % of time that the price will at least come back to the level where the divergence first started. I find this will be the case more with continuing divergence than regular divergence (continuing can do this without conformation of divergence from any other indicator), so when expecting this to happen with regular I like to see divergence on the 3 indicators which are shown on the chart.
    Attached Thumbnails Attached Thumbnails Confirmation Techniques for the Gartley pattern: Divergence-gbpusd-1h-divergence-3-indi.gif  
    Last edited by Robot Trader; 07-18-2012 at 08:52 AM.

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    Thanks for the detailed reply! How do you define continuing divergence? I only consider regular and hidden.

    Yes, price pulls back to the starting point of the divergence move on 9 out of 10 occasions therefore forming a Crown/HeadNShoulders pattern.
    This combination of divergence +Crown is extremely reliable and one cane actually trade these exclusively without ever bothering about any other pattern and can still make boat loads of dough!

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    Quote Originally Posted by duggils View Post
    Thanks for the detailed reply! How do you define continuing divergence? I only consider regular and hidden.

    Yes, price pulls back to the starting point of the divergence move on 9 out of 10 occasions therefore forming a Crown/HeadNShoulders pattern.
    This combination of divergence +Crown is extremely reliable and one cane actually trade these exclusively without ever bothering about any other pattern and can still make boat loads of dough!
    Continuing divergence is when the MACD histogram forms divergence without going NPN or PNP (N = Negative & P = Positive) so we look for at least 3 sets of bars, SET 1) high bars followed be SET 2) low bars and then SET 3) high bars which are higher than the low bars (in SET 2) but not as high as the first high bars (in SET 1) that start to form the divergence and this all happens on one side to the histogram N or P side. The histogram then starts to form a slope which is moving in the opposite direction to PA, which is divergence but I refer to it as continuing divergence and on the higher TF's price will normally always return to where this type of divergence first started.

    I have attached a 15m chart to show an example of what I mean
    Attached Thumbnails Attached Thumbnails Confirmation Techniques for the Gartley pattern: Divergence-audchf-continuing-divergence.gif  
    Last edited by Robot Trader; 07-19-2012 at 07:42 AM.

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    Thank you RT.
    Very well explained...appreciate it!

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    Confirmation Techniques for the Gartley pattern: Divergence-divergence.jpg
    divergence explained.
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