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Re: Reversal Swing Convergence Divergence

I think it's a bit foolish to just look at any old divergence and use them as signals. Questions need to be asked first... apart from "does it work?".

1/ Why does it work

2/ What is it the indicator measuring

3/ The the divergence on the indicator reflect the theory

4/ Are there other extraneous influences which may invalidate the divergence

etc etc

The fact is that proper divergences are showing a slowing/weakening of the momentum of the prevailing trend.

For this we need a momentum indicator such as MACD and why the stochastic oscillator is useless (as it measures the price relevant to a range).

To understand divergences and what is happening, you need to be able to understand what the oscillator is measuring, how it is constructed (there is a thread on this) etc. In this way once an oscillator divergence "alerts" you to a possible slowing of the trend momo, you can view the price action to determine whether this fits the theory.

The key is in understanding the indicators and what they are actually showing you, if anything.