The Importance of Divergence & Intermediate-term Time Frames
While it isn’t always easy trading intermediate-term time frames — the 60-minute and 240 minute charts — because of the divergence in trend you will experience between both the short and long-term time frames, and the fact that you have to sleep at some point, they do prove very handy in determining when trade signals on the lower time frame charts — 15 and lower — are worth taking. This morning proved a great example of this. While the Weekly and Daily trends for most of the majors were decidedly lower coming into today, there was positive divergence building between price and momentum on those intermediate-term charts. At the same time, the previous session’s lows were holding on the short-term charts — see chart below — and that same positive divergence seen on the momentum indicators on the 1-hour and 4-hour charts proved a nice heads up that a short-covering rally was in the cards on the shorter-term charts for the U.S. intraday session — see chart below.
Jay Norris
www.trading-u.com
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments.