One of the strongest signals in trading is convergence-divergence. Many traders call convergence “bearish convergence”, and divergence – “bullish divergence”.

Convergence arises, when a straight line, drawn through two local minima on the oscillator (from left to right - the first one below the second one), and a straight line, drawn through two local minima on the chart (from left to right - the first one above the second one) converge.

Divergence arises, when a straight line, drawn through two local maxima on the oscillator (from left to right - the first one above the second one), and a straight line, drawn through two local maxima on the chart (from left to right - the first one below the second one) diverge.
    
In our opinion, the most effective method is detection of divergence between fractals and oscillator (Stochastic, Macd, RSI, Momentum, Power RVI etc.) – “fractal divergence”.

Many principles of the financial market originate in basic principles of mathematical analysis. The fractal theory in mathematics is based on the fact that phenomena, which surround us, often consist of the self-repeating things – a lift, a tree, a coastal line; all these things are vivid examples of fractal figures. A fractal in mathematics is an infinite geometrical figure, each fragment of which is repeated at scale reduction.

VIDEO - Fractal divergence explanation (MetaTrader 4 Indicator STO-Div)




Fractals – one of five indicators of Bill Williams’ trading system, allowing to find out a trough or a peak of the price chart. An up fractal is technically described as a series of at least five consecutive bars, in which two bars with lower maxima are situated directly before the highest maximum and right after it. The opposite configuration (a series of five bars, in which two bars with higher minima are situated directly before the lowest minimum and right after it) corresponds to a down fractal.






Fractal divergence between Fractals and Stochastic Oscillator (MetaTrader 4 Indicator STO-Div)

Metatrader indicator Sto-DIV shows fractal divergence by Stochastic indicator . When divergence arises between Stochastic indicator and the price it means forthcoming end of current trend. The signal to buy comes when new Low-fractal is below the previous one, and corresponding Stochastic meaning is above the previous one The signal to sell comes when new Up-fractal is above the previous one and the corresponding Stochastic meaning is below the previous one.


Fractal divergence between Fractals and Stochastic MACD (MetaTrader 4 Indicator MACD-Div)
Metatrader indicator MACD-Div indicates fractal divergence by MACD indicator.When divergence appears between MACD and the price, it indicates a high probability that the current trend will finish soon. A signal to buy is when a new Low-fractal is formed below the previous one and a corresponding MACD value is higher than the previous one. A signal to sell is when a new Up-fractal is formed above the previous one and a corresponding MACD value is lower than the previous value. The indicator has a lot of customizable settings.



STO-Div Indicator Parameters:

int Width.Min = 1;	Minimal width of model, bar
int Width.Max = 25;	Maximal width of model, bar
int Height.Min = 15;	Minimal height of model, pips
int Height.Max = 1000;	Maximal height of model, pips
int KPeriod = 21;	Period (bars quantity) for %K calculation
int DPeriod = 12;	Period (bars quantity) for %D calculation
int Slowing = 5;	slowing
int MaxBars = 1000;	Max bar restriction
int Shift.Arrow = 40	arrow shift , pips
int Shift.Dot = 20;	point shift , pips
int Shift.Line = 0;	line shift, pips

We can add extra alerts for our Indicators: pop up alert, e-mail alert and sound.




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BJF Trading Group