Effective Divergence Indicator

6 Jan 2021

What is EffDI?

Effective Divergence Indicator(EffDI) is a modified Momentum indicator designed to detect divergences in stocks, futures, forex, and crypto, just to name a few.

How does it work?
It uses the EMA of daily velocity.

Isn't this the same as Momentum
No. Momentum compares the price x days ago, while this takes the EMA of the daily velocity.

Why is it better than momentum in detecting divergence?
Because it uses an EMA, an EMA gives weight to the latest prices. I don't know how to explain the logic behind this, but it works :)

ok,ok, I get it, but how do I use it to buy, sell, and get a ton of profits?
Refer to the diagram below.





Steps:
Step 1: Locate the divergence(marked A,B,C and D): no divergence, no trade.
Step 2: Locate the last EffDI high. Mark that E.
Step 3(entry): Buy when price goes above E. For shorts, Short Sell when price goes below E.
Step 4(exit): Exit position when another divergence is detected,
OR
When A new Lower Low is formed.


As you can see, if you follow the steps, there is a good chance the profits will come to you. Cheers!




DO YOU WANT MORE GOOD INDICATORS LIKE THESE TO IMPROVE YOUR TRADING? Then, make sure to follow Trader_ph (or i will eat all of your cookies)

Feel free to use my code below, BUT make sure to credit me if you make any modifications. :)