Assists in buying bottoms and selling tops Detects when trends are weakening Helps determine when to fade break-outs
Selling tops and buying bottoms is one of the most difficult trading
strategies. It is highly risky because you need to determine when a trend is weakening. Divergence is one of the few tools that generates effective signals when trends weaken.
There are two products we sell for detecting divergence. The first is called DivergEngine2001. It is an advanced divergence detection utility that uses sophisticated algorithms to perfectly synchronize the peaks in the oscillator with the peaks in price. If you purchase this product you also get Divergengine98.
If you wish to use your own oscillator then consider buying DivergEngine98. It is a collection of systems, indicators and user functions that detect and display divergence using algorithms radically different from Divergengine2001. The benefit is you can use own custom oscillator with Divergengine98 but the drawback is that the peaks in price will not be perfectly synchronized with the peaks in the oscillator.
There are all kinds of divergences so it might be helpful to review Divergence Theory. The classic divergence is
between price and an oscillator such as RSI or Stochastics. Divergence can be bullish or bearish. Bullish divergence is when prices move to new highs and the oscillator does not. Bearish is when price moves to new lows and the oscillator does not.
- A paper presented to the MTA on 5-19-01 proving the validity of