Day Trading with Divergence Momentum Speed and Price Action

– Divergence in Price, Momentum, and Speed

o Divergence is a term we use to describe when two things are going in opposite directions

 Example:

• Price rises and momentum falls
• Price rises and speed falls
• Price rises and big sellers

o I believe that divergence is a sentiment tool, NOT a trade pattern tool
o We have high % trade patterns that we use with the divergence in the market.
o Here’s what I want to watch:

 4-range chart of any market
 Pace of Tape Indicator
 Momentum on 4-range chart

o This will work on any market in any timeframe, any pattern.

– High of wedge pattern, but the lows of the channel, which is more important?

o Depends on which pattern is on the slower timeframe

o Example:

 4range chart shows bearish channel
 13range chart shows a bullish wedge

• Bullish wedge takes control b/c it’s the slower timeframe.

– How important is SPEED in our trading?

o Speed is the most important factor in your trade decisions
o More speed = more people
o More people = more consistency in S/R
o More consistency = more confidence for a trader
o More confidence = more profit!
o We use the pace of tape indicator
o Read the tape looking for faster pace of the orders coming into the market
o Read this article on Speed

o I will also look for patterns on the POT indicator, looking for increasing speed to confirm the move, and decreasing speed to avoid the move.

– NT 6.5 indicators do NOT work on 7.0 unless you have them converted to the new software.