Trading Divergence/Convergence


Hey NVP I hope that you are doing good. What do you think about potential spread trading? I was thinking that maybe it won't be bad to look for wide spreads between two currencies but instead of watching to buy stronger currencies, I am watching that spread will eventually back into normal between two currencies, which mean spread will decrease. Of course, I will like to currencies to start decreasing the spread before the eventual entry and of course price action must go with it

Hi peter - hope you are well my friend so - are you are talking about finding the 2 most divergent currencies and trading the convergence ? ......yes thats a pretty standard approach that i have talked about a lot over the years on my trade2win forum .........2-3 years or more back in truth i rarely trade that strategy as i mainly chase trends....but it can be very effective if combined with the usual other o/b o/s indicators on the pair chart identified as alpha divergent in the g8 ..........like BBs and RSIs etc ..........you could easily combine price action patterns and perhaps some S/R levels to complete the strategy you will normally find that CAD , Yen and GBP will dominate this strategy in pairs .....because they are the most volatile normally ........interestingly if yuo found an alpha divergence with currencies that are not on this trio that indeed would probably be worth looking at for a retrace trade look at below ....5 min london morning on a 20ma FXCorrelator see how the Yellow yen , red gbp and brown cad are ALWAYS either max or min value currency ? sure some of them do reverse ..but the skew of the MA will always look better than it normally is happy to talk more on this my friend ........... had a great morning selling Cable today

heres a 1hour chart 20 ma FXCorrelator 20 ma BB on 2 standard devs so i look for retrace trades when red GBP and yellow Yen are max and min currencies vs zero line is it a strategy ......sure its not too bad ......just sprinkle in some additional price action confirmation .....perhaps some S/R confluence ...... ive discussed this at length in many many posts a few years back and its not too bad I scalp and trade on much higher probability signals than these ...but then again perhaps i am missing something N


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