MACD divergence on 28 November

[socrates]

Originally Posted by Trader01

Its 8:47 ET right now and Eur/Usd is dropping like a stone.


Listen to the crap they are saying now.

Then go back to your chart and see the real story; the only one that counts.

As a further experiment find the best fundamental analyst and get him to time a call.

Finding a fundo who can make a decent timing call is like finding a one-legged winner in a butt-kicking contest.

What do yo think just happened there? Fundementals........

New orders for durable goods jumped 3.4% in October vs. an upward revised decline of 2.0% in September.
This is the stuff that moves the markets, make no mistake about it. Consensus was about 1.8%.
Anyone who thinks that the Japanese reserve bank buys dollars cause the macd is in divergence is somewhat twisted, or any other large investment house for that matter.
The trend, without a doubt, is determined by the fundi's, interest, etc.

[SoundFX]

Socrates,

With all due respect, I think you're missing the point a bit here...

The trend is indeed determined by fundamentals. Socrates, no one here is claiming that MACD divergence DRIVES the market. Its simply an INDICATOR....thus INDICATING where the market is going. And I can assure you that MACD divergence has tipped the hat of the market on many an occasion well before the fundamental news hit the street. And this is likely because the major players already know what is going to happen, and thus they position for it with gigantic orders, thus swaying the market and leaving telltale footprints in the form of silly things like...MACD DIVERGENCE. You see, little ants like you and me can only use fundamentals AfTER they've done their work. But tehcnical analysis allows us to get an idea of what might happen, like a shadow on the ground rounding a street corner in the late day sun before the person responsible for said shadow is present. If I see the shadow move, I've got a decent idea of what's up.

OK, that was a weird analogy, but I'll stick with it.

-SFX

[birdjaguar]

The trick is to be consistent with what you use. If you always use techicals, then you will be able to tell when they are not working and make the appropriate corrections or stand aside. The same is true for fundamentals. Sometimes the market moves opposite the direction that fundamentals suggest. Of course the price will always come back, but most people do not have deep enough pockets to wait on that. The banks can do this because they have depth. Most smaller players follow technicals partly because they don't have the cash to wait on fundamentals to play out. This trick is not to confuse yourself with switching from one to the other. You will end up being wrong almost all of the time. If you use MACD, stick with it. If you use strictly fundamentals, stick with it. If you use some combination of both, use it consistently. But don't jump from one to the other because you will inevitably switch at the absolute worst time. By the way, the techinicals and the interest rates suggest we may be seeing a short term top in the USD. What do you guys think?

[fxmktlgc]

Any ideas on you trade with MACD divergence? Here's an article I just posted on another thread about countertrend trading by scaling into positions (supposedly what the "dealers" do).

http://www.investopedia.com/articles...ACDdiverge.asp

Originally Posted by birdjaguar

The trick is to be consistent with what you use. If you always use techicals, then you will be able to tell when they are not working and make the appropriate corrections or stand aside. The same is true for fundamentals. Sometimes the market moves opposite the direction that fundamentals suggest. Of course the price will always come back, but most people do not have deep enough pockets to wait on that. The banks can do this because they have depth. Most smaller players follow technicals partly because they don't have the cash to wait on fundamentals to play out. This trick is not to confuse yourself with switching from one to the other. You will end up being wrong almost all of the time. If you use MACD, stick with it. If you use strictly fundamentals, stick with it. If you use some combination of both, use it consistently. But don't jump from one to the other because you will inevitably switch at the absolute worst time. By the way, the techinicals and the interest rates suggest we may be seeing a short term top in the USD. What do you guys think?

[socrates]

SFX

LOL at your analogy, weird, but yet good. I like it, permission to use it?

My reply was not really directed at you, but rather to Trader01. I understood him to be of the belief that it is the charts that moves the markets, not the fundi's, and it was that point in which I dissagree with him.

I agree with you whole heartedly that macd divergence can give an indication of what may happen in the near future. I use divergence a lot in my trading, though normally RSI and some macd. My beef though was that someone could say TA is king and fundi's the queen, when clearly that is not so, quite the opposite.

Use the fundi's for trend, TA and price for entry.

[SoundFX]

I gotcha, Socrates. And I apologize if my reply sounded condescending in any way. Judging by your moneytec join date, you've got a few more years of Forex experience than me. Happy trading!

-S

[birdjaguar]

First, allow me to mention that Schlossberg is my absolute favorite Analyst. He writes for Daily FX and he used to publish the 'Week Ahead' report for Refco. I really miss the 'Week Ahead' report. If anyone knows if and where he may be publishing this information, please let us know. With that said, I would advise caution with his MACD divergence technique. Certainly it can work well if you manange your P&L well. However, oftentimes indicators diverge only to reset and then the price continues in the same direction. Oftentimes, divergence does not signal a reversal. The price may consolidate as the indicator resets and then continue in the same direction. What I am relating here is that volatility is more mean reverting than price. For this reason I am uncomfortable using a scale in strategy against a trend (particularly martingale type scale in). I will, however, occasionaly use a similar strategy for a volatility breakout. For example, check out the last 8 days of EUR/GBP.

[Trader01]

Originally Posted by socrates

SFX


My reply was not really directed at you, but rather to Trader01. I understood him to be of the belief that it is the charts that moves the markets, not the fundi's, and it was that point in which I dissagree with him.


Use the fundi's for trend, TA and price for entry.

No socrates, that is incorrectly duplicated.

Let me explain:

What the charts show is the footprints of market players; what they actually do in terms of buying/selling -- just hard, cold facts. That is the only truth in the markets. Fundo facts can be chiseled, fiddled with and fudged.

I have not yet seen anybody mess with the Open, High, Low and Close (& volume, if applicable) -- this is the food of TA fellas. If/when they start corrupting this data, I will become a signal seller and make a criminal fortune.