Day Trading Stock Tip Lesson - Double-Divergences For Back-Testing Ideas

>...

Many day trading systems incorporate variations into their calculations, but many fail to get further confirmation from another time frame. Because you should never trade live money without first doing some form of testing, consider adding the additional condition that if your strategy back-testing: a higher time frame is also showing signs of deviation in the same smjeru.Tehničkih indicators that will be used as oscillators and usually they are stochastics, relative strength Index (RSI) and Moving Average Convergence-divergence (MACD). Consider looking at the timeframe of 5-6 times larger than your intraday trading timeframe.

let's use the example of the trading day lesson stock tip:

SYMBOL = ABCXYZ (not a true symbol) Trading Time Frame = 5-minute chart longer time frame = 30-minute chart (6 x trading time frame length) lowest price in the last 30 bars was 23 bars before (at 5-minute time frame) for $ 24.32 14-period RSI 23 bars before had a value of 21.00

Now, if the last bar made ​​a new low at $ 24.20 (12 cents below the previous low), look at the RSI indicator. If the value of 29.50 will notice that there is actually an indicator of higher than the previous low price, although the share price is now lower. It is "a positive divergence." Be alert for a possible reversal, if market conditions are otherwise normal, or at least be wary of any short positions you have in May symbol ABCXYZ.

To get EXTRA confirmation, consider looking at the 30 minute chart. If you see one more "positive divergence" in the 30-minute chart (like the 5 minute chart), then consider your actions accordingly. Incorporate this second, longer time frame divergence as part of a new strategy to return to testing. May you find that the filter variance so that the second deviation can help you improve your trading results. As always, before committing any money be sure to back-test on the symbols (or symbols of the universe), who warn you that you will trade.

If you have any questions at all, discuss with the relevant professional financial advisor who can help with your trading strategies. Remember that all trading and investing, especially day trading, you risk losing significant amounts of money. Follow all the standard financial sacrifices and spend significant time at your risk and money management techniques.