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Hi Vince-
First thank you for the time you took to provide me
with some suggestions and furthering some thought
on divergences and the like. I hear what you are
saying with respect to,"...sometimes each of us see
things in charts or too-small samples of charts
that do not cover all kinds of markets - that are
only what we are looking for - we each tend to not see
things that disagree..."
I've struggled with this in the past learning from
others, unsuccessfully I might add.
However, currently my own path to trading
enlightenment has me believing that in fact it is this
very "thing" that allows for a great trader to come
into being. That is to say, that what it is that s/he
is looking for, whether it be a setup and/or certain
set of market dynamics that cumulatively are the
precursor to you the trader putting on that trade is
in fact where the truth is for each of us.
Admittedly, with respect to the Reverse divergence
point that I made earlier. I do not have a codified
divergence engine in place at this time for that
particular trade setup. I have to be watching for it,
can't tell you specifically in all cases where it has
more validity than say another of arguably equal
importance that I just negated on some technicality.
However, I know it when I see it.
I believe therein lies the key to the difference
between a profitable trader and one who just breaks
even to looses.
Although I'm sure I haven't had the years of
experience or the knowledge thereof to test for
statistical significance on matters of divergences
such as this Tom Bierovic or for that matter
Larry Williams, I'll take your word that they have
done so.
However, my concern is more along these lines with
regards to whether divergence, reverse or otherwise
works or doesn't...
an author that I've brought up just recently to the
List, Thomas Stridsman, from his book that each day
I'm finding tid-bits of knowledge that just hit right
on target with me, says this; ".......In a correctly
built system, your're interested in exploiting
something that should, on average, work well in
several different markets and over several different
time periods, Not with any specific type of anomaly
that might or might not still exist in a particular
market."
As for now, what I'm trading works. It is recognizable
by the naked eye, and within the parameters of my
current brain capacity to trade.
However, my worst fear is that I'm trading an anomaly.
By my own admission I lack the meticulous back-testing
skills I believe necessary to check validity
of this setup to degree where present company might
consider this setup worthy.
What I know for the here and now is that it makes
money. My bottom line view on the market and those
that derive their living from it is simply this, milk
whatever it is that is working for you for all that it
is worth, once the milk stops flowing, hopefully
you can do something with the meat.
-mike ball
--- Vince Heiker <tachyonv@xxxxxxxxxxx> wrote:
>
> Tom Bierovic studied divergences extensively a few
> year back. He found
> divergences to be no better than random at
> predicting price direction. I
> think, but am not as sure, that Larry Williams found
> the same thing in his
> research, done before or about the same time as
> Tom's, if I am recalling
> correctly.
>
> For my part, have found divergences worthless over
> the last decade+.
>
> Am not saying that the following is the case on your
> part, Mike, but
> sometimes each of us see things in charts or
> too-small samples of charts
> that do not cover all kinds of markets - that are
> only what we are looking
> for - we each tend to not see things that disagree.
> E.g., I was recently on
> the hot trail of shortable patterns that I was sure
> that I saw before during
> and after earnings projections/announcements,
> following 52 week highs - that
> no one else seemed to have seen....for a couple
> months...only to discover
> that the patterns were too unreliable, were trumped
> by other events & market
> conditions too often to be tradable.
>
> So, be careful...Tom Bierovic does good research.
>
>
> Vince Heiker
> Flower Mound, Texas
>
>
> -----Original Message-----
> From: mike ball [mailto:thinkpad600e@xxxxxxxxx]
> Sent: Sunday, November 23, 2003 8:39 PM
> To: DH; Omega List
> Subject: Re: My Take on Diversion (edit: divergence)
>
>
> on Divergence and Reverse Divergence...
>
> There are many metrics within which to consider when
> trading this setup in real time. Yes, as many have
> pointed out it is not an easy task to recognize
> validity of these.
>
> However, to those that have simply dismissed them as
> useless, I most definitely can raise my hand as one
> that is in opposition to your opinion.
>
> I don't discount the validity of your research
> methodology as I have no way of discerning the
> appropriateness or usefulness of the
> "number-crunching" that I'm sure you've done.
>
> The realizations that trading the markets intraday
> as I'm sure most on this list will agree is that No
> ONE indicator alone seems to get the job done.
> However, a "very good" indicator with a few "other"
> parameters defined by filters or secondary
> indicators
> validating the primary can be a trading weapon of
> considerable validity and repetitive usefulness.
>
> A very powerful setup that I use on a daily basis
> and
> is quite pronoucned at least a couple of times
> throughout the trading day is the concept of reverse
> divergence in a HRTBC(Higher Reference Tick Bar
> Chart)
>
> Most precisely validated by the dynamics that are
> occuring in lowest reference Tick bar chart I view
> to
> take my entries from.(100TB)
>
> Whereas to say that a trader may be considering the
> 200TB chart as the HRTBC and waiting for a
> resumption
> in trend(up), finds that price nose dives
> creating the onset of what looks to be the initial
> forming of Rev. Dvg. in your Stoch/RSI indicator(s)
> accompanying "Filters"; High Tick Vol., potential
> piercing the 3rd std. dev. on the BBs with acute
> force
> directly into a "significant" 2B and/or Trendline,
> price congestion level take your pick, only to be
> met
> with instantenouse reversal bars
> or extremely evident "market hesistation" never
> allowing the primary moving average of the HRTBC to
> be violated, could perhaps deduce that a resumption
> in
> trend could likely be in the making.
>
> Codifying a Divergence Engine correctly or
> appropriately within a given market may be something
> that is of on-going neccessity and perhaps not worth
> the maintainence costs involved if the given market
> from which the attempts at the recognition of
> divergences are ultimately producing trades that are
> statistically ending in very little derived point
> value. A.K.A. the trade isn't giving you enough Bang
> for your Buck.
>
> However, what I find as quite useful in my daily
> trials and tribulations at trading this particular
> setup of mine is simply this.
>
> If in fact the reverse divergence signals that I'm
> playing off of fails. Then what I do expect from
> market and happens quite often enough to extract the
> realization of profits is that the market WILL go
> the
> other way, once the divergence is "taken out"
>
> Some might say that an indicator that is Overbought
> or
> Oversold stays Overbought or Oversold. Yes, that is
> true is some cases, and in those that it is Not...
>
> Well there you have my setup.
>
>
> cheers-
>
>
> mike ball
>
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> --- DH <catapult@xxxxxxxxxxxxxxxxxx> wrote:
> > > However the
> > > one type of divergence that seems to have some
> > predictive value is
> > > intermarket divergences.
> > <snip>
> > > I found it was much more difficult to implement
> > > real time than in hindsight
> >
> > Bingo! As Mark correctly points out, even in
> John's
> > cherry-picked
> > charts, he conveniently ignores several turns of
> the
> > McOsc and draws his
> > trend lines on the "real" turns. The eye is very
> > good at recognizing
> > these patterns after the fact (too late to trade)
> > but we don't have that
> > luxury when trading the right-hand edge of the
> > chart. There are too many
> > fake-outs realtime to make it a very useful tool.
> >
> > And yeah, been there, done that, lost money, got
> the
> > "I survived"
> > t-shirt, moved on.
> >
> > "If it works, code it and prove it."
> > (Paraphrase of the philosophy of my friend and my
> > first mentor, Mark
> > Brown. I forgive him for accusing me a being a
> > closet astrologer. :-)
> >
> > --
> > Dennis
> >
>
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