In the first part I gave you the #1 objective of a trader.
In this second one I’ll give you the second and the third most important rules of trading.
#2: yield to reversal divergences
#3: prepare for a sound barrier failure
My all you can diverge buffet, God Awesome Indicator got an upgrade in the 1.7 version by including a search for the last 3 RSI2 divergences on the up and the downside. They are plotted in gold colour.
The yellow lines are stochastic reversal divergences.
The brown lines are stochastic continuation divergences and the red ones are as well but with a more serious sample bracket.
Why did I sell at the price level on the above image? Because price walked into the net of the last RSI2 divergence (after printing an RSI2 Sharpie at the bottom – purple square). See, price does not have to stop dead at the RSI2 divergence plot, it may exceed it by 1/2 fluctuation size which is 16 pips on the EUR/USD. Only upon exceeding that would I consider the divrgence failed. And if you look left there are additional untested RSI2 reversal divergences nearby. These 4 altogether (one is no longer plotted, the 4th – it has its end at the last upper sharpie) would make for a rather tall order to overcome.
The sound barrier I referred to is the fluctuation size distance which is another plot of the same indicator – the white lines projecting the limitation of a move that does not mange to step outside of the fluctuation range (the box itself is from Fluctuation distance to Fluctuation maximum).
What is important here is gives you with high probability the extent of the move you could capitalize on and spells out a number as well. (I.e. CoVeR 1/2)
An RSI2 divergence can be considered as a root that is likely to yield the untrapped participant 3 pushes in their holding direction. Respecting this would be closing the holdings in the opposing direction and only reinstaging them upon breaking the divergence (by 20+ pips).
I have articles on the Blog about the Fluctuation size as well as about the features of the God Awesome Indicator.
Call me to say how much it would be worth to you to have a copy of it.
An extension is a no break after a power move. 1/2 fluctuation size = 16 pips would be a no break. 43-16=27
The utmost condition is no more stars (overdrive) and RSI2 divergence = bet the farm now!
No more stars = white stripe