Tuesday, May 21, 2019

Consistent or inconsistent results? Divergence?

Irrespective of whether one uses charts or financial analysis, he or she will experience market place  wild swings. The chart promoters will always focus and sell the idea of TARGET LEVELS PREDICTION. Who would want to focus on TREND and CYCLE!!!!!!

In reality the chart is a very simple tool and in my opinion a very reliable tool as long we don't abuse and interpret it according to our mental bias but what the chart is displaying about trend and your tools are helping you guide cycle trend.

Many times I had paid my price for defying what the chart trend is telling me as I am stuck with my mental bias especially after reading "news".

The school of chart analysis are divided into many different approaches with different theories. The classic subject of chart analysis is DIVERGENCE. This terminology can either make you rich or poor. Each and everyone who walk into the realm of "technical" chart analysis encounter this magic word DIVERGENCE.

The wonder of this divergence is ONE will encounter hit and miss results! The question is WHY? Is the concept Divergence applied wrongly? YES, that is why you get more "misses" than "hits" with divergence. How is divergence applied in a trend cycle? There are more than a library list of so called fallen Gurus who died with divergence especially Novice Gurus and Amateurs.

Divergence(s) is NOT a confirmation. It is a warning!!! Confirmation comes from price trend change! On the reverse all the novice and amateurs take divergence as confirmation.

PRICE TREND versus INDICATOR CAN REMAIN IN A DIVERGENCE STATE FOR A LONG LONG LONG TIME BEFORE THE CYCLE ENDS AND PRICE TREND ULTIMATELY CHANGE!!!!!

If one act solely of the divergence concept, the results will be yo-yo. There is nothing wrong with the charts. There is nothing wrong with divergence. The only thing that is wrong is how divergence is understood, applied and how to handle divergence state.

WHEN DOES DIVERGENCE DEVELOPS IN A TREND CYCLE? WHAT DOES PROLONG or EXTENDED DIVERGENCE MEANS? WHICH INDICATOR(S) IS THE MOST RELIABLE TOOL TO UNDERSTAND DIVERGENCE?

WHAT DOES THE non-DIVERGENCE STATE MEANS and when does it happen in a cycle?

Once you are able to understand all the above, you will find engaging a Low Risk High Reward is no longer elusive but a REALITY.       
  

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