Advanced price divergence

I’ve also seen entire trading plans based on price-

with many well-chosen examples. I’ve never seen one of these plans that actually made money, but the systems are sold to na¨ıve traders who don’t do their homework to prove to themselves how useful (or useless) the setups really are. For every price-momentum divergence example that resulted in a trend reversal, I can just about guarantee there were one or two and probably a lot more that did not result in a trend reversal on the same data. I don’t know how many times I’ve read an article in a trading publication about a momentum divergence strategy where, on the same data on the chart the author used to illustrate price-momentum divergence setup and price reversal, there were other identical setups that would have resulted in losses that the author simply ignored!

But I digress from the important task at hand: how to use Dual Time Frame Momentum Strategies for trade setups.

The concept for Dual Time Frame Momentum Strategy trade setups is simple, practical, and logical: Trade in the direction of the larger time frame momentum; execute the trade following the smaller time frame momentum reversals in the direction of the larger time frame momentum. Let’s take a look at a couple of charts and see how valuable this strategy will be. We’ll use the SPX daily data for the higher time frame momentum and 60-minute data for the lower time frame momentum reversals for this example, but it works the same for any market and any two time frames.