Divergence is a powerful concept in Technical Analysis. Adam's workbook covers this topic from pages 122-127 inclusive. A sample of the pages is shown below.
Whilst Adam's materials focuses on the indicators that he teach, in theory, the divergence concept can also be applied to other popular technical indicators. Like other technical tools, the longer the divergence period or the clearer the divergence signal, the more powerful the signal in general.
In my April and May 2015 presentation to the WAI, I shared the trading results of a real life trader ("Yong Liang"), where one of his key systems is actually trading divergences. You can review his trade results here in this posting - http://waiicpenang.blogspot.my/2015/05/waiic-slides-515-ideas-to-trades-real.html. Go to page 8 of my slide. During the period covered, he made 9 "divergence" trades, winning 5, losing 4, with a Net win of +3.6R. As he risked approximately 2% capital, his portfolio gained over 7.2% capital alone from these 9 divergence trades.
In short, powerful stuff, and you don't need too many entry methods to grow your capital. The key is to predefine your entry, stops, profit targets, risk the same % capital for every trade and control your portfolio heat. Be disciplined.
Chart Patterns from Steve Burns
Once you understood the common principles of Adam's entry methods, you can extend the same underlying principles to other chart patterns. Today, I saw Steve Burns tweet, and took this snapshot of the popular chart patterns that he tweeted out:
The "Rectangular Formation" is the same as Adam's Horizontal Breakout trade.
The "Inverse Head and Shoulders" is very similar to Adam's 1-2-3 Change in Trend.
These are more than enough patterns to generate 20 trades a month, either on Daily or on Hourly charts. The key is not necessarily knowing more patterns, but know extremely well the few core ones so that you can quickly identify them whenever you look at a chart. In time, anticipating various patterns will be 2nd nature to you.
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