The document discusses rules for analyzing stochastic indicators to identify divergence and convergence points in financial charts. It notes that divergence occurs when the stochastic value moves opposite the price, while convergence confirms trends when both move together. Specifically, it points out divergence on the left side where stochastic rises as price falls, and convergence in the center where stochastic and price troughs rise together, suggesting rules for using stochastic signals to time entries and exits.
The document discusses rules for analyzing stochastic indicators to identify divergence and convergence points in financial charts. It notes that divergence occurs when the stochastic value moves opposite the price, while convergence confirms trends when both move together. Specifically, it points out divergence on the left side where stochastic rises as price falls, and convergence in the center where stochastic and price troughs rise together, suggesting rules for using stochastic signals to time entries and exits.
The document discusses rules for analyzing stochastic indicators to identify divergence and convergence points in financial charts. It notes that divergence occurs when the stochastic value moves opposite the price, while convergence confirms trends when both move together. Specifically, it points out divergence on the left side where stochastic rises as price falls, and convergence in the center where stochastic and price troughs rise together, suggesting rules for using stochastic signals to time entries and exits.
First find the divergence points historically – on the left of the chart the stochs value is going up when the price is going down. Second find the point of convergence historically – confirmed by trendline on both indicator and chart. Another area of divergence (sell) is show in the left centre of the chart. In the chart centre, the indicator follows the price (HOW do we know- the values of the stochastics troughs are rising with the price troughs). On the third red vertical line there is a stronger divergence point that is later confirmed to be the convergence point. Below is the EU daily and buy convergence is now taking place (April 2013). Convergence has still to be confirmed. Until convergence is verified, the direction is still either down or undecided.