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Indicator divergence |
chennuru
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Joined: 07 Jan 2011
Posts: 93
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Post: #1  Posted: Sun Oct 02, 2011 11:49 am Post subject: Indicator divergence |
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Dear Friends,
which technical indicatator tells about trend reversal in the the terms of divergence,
and what is time frame, and indicator setting verces time frame.
thanks in advance,
chennuru
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opportunist
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Joined: 27 Apr 2010
Posts: 356
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| Post: #2 Posted: Sun Oct 02, 2011 12:11 pm Post subject: Re: Indicator divergence |
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| chennuru wrote: | Dear Friends,
which technical indicatator tells about trend reversal in the the terms of divergence,
and what is time frame, and indicator setting verces time frame.
thanks in advance,
chennuru
oman |
There are many ways to tell about divergence but price volume divergence is the basic and most potent. In fact other divergences are derivatives of the above. Let me explain why.
Why do we use indicators? It is to understand market trends and feel when the market is going to change its trends. If we try to understand market trends only two primary events happen all the time
a) change in volume of scrips bought or sold
b) price of the scrip
Generally as per law of demand and supply, if there is more demand the price will rise and vice versa. A rising volume therefore is a precursor to price rise and vice versa. Unfortunately the volume rises almost at the same time as price rise and therefore difficult to exploit.
Sometimes however a strange thing happens - the price rises despite a fall in volume. This means that although few sellers are increasing the price and there are some buyers who are ready to pay that price the number of buyers and sellers are dwindling to nothing. Soon there are no buyers for that high a price . It is at this point the price starts falling and there is reversal.
What I have just elaborated is known as Price Volume divergence. So whenver you see prices rising but volume declining simultaneously get ready for a reversal in trend. Alternatively if price is falling despite rise in volume of transaction it is most likely that prices will reverse the trend and start rising.
I hope I have been able to make this clear.
Regards,
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chennuru
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Joined: 07 Jan 2011
Posts: 93
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| Post: #3 Posted: Mon Oct 03, 2011 12:18 am Post subject: |
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Thanks my friend,
it is very clear now, |
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