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. :)
Hi just wanted to say thank you for the free indicator. I’m going to put it to use right away, can’t wait to see the results.
Trader_ph
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@ShortsyGurl, Thank you! I just want to note that this indicator is not 100% perfect. But it yields good results, in my experience :D
keshkeshmoney
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wow, this thing is beautiful!!! Truly truly. Thank you.
yinced
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What does it means when there is a reverse divergence? Higher lows on price but lower lows on indicator or lower high on price and higher high on indicator. Thanks again!
yinced
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Hi. Just want to know what it means when there is down divergence for higher highs for a long period of time (3 days) on the 1h time line. Thanks.
yinced
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Hello. I would like to know what is the best time frame to try your indicator? Many thanks!
Trader_ph
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@yinced, it depends on the stock/crypto/currency you are trading. For crypto and BTC, it works well any timeframe. For experiment try doing it on 1 hour, since divergence is seen very much. Thank you!
DEAD_HUNTER
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Is there any rule as to how many bars that can pass before the signal gets too old? Say for example there is bullish divergence and you identify the high and wait for the line to cross the high but 10 bars or so occur before it finally breaks that high. Would the signal by then be outdated?
Trader_ph
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100 likes, thank you guys!
Trader_ph
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Wow, thanks for the likes? By the way, how is the indicator in your opinion guys?