Renko | Long Options using DC, BI and Divergence
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Concept:
I believe that a good and reliable way to consistently make money (intraday) by going long is entering in undervalued zones and exiting when the price is overvalued/overbought. This can be true irrespective of strategy/setup/indicator. Fundamental analysis has methods to determine if the instrument is undervalued and a good buy. What are the methods to determine value using technical analysis? There are many ways as listed here: ([https://tinyurl.com/u6vyhp3a](link url)). Among them, I find 'support levels' and 'oversold indicators combined with divergence' to be of great help. In this strategy, I have used Donchian Channel to identify support and Brick Indicator to find oversold areas. Add to this the key ingredient of divergence.Setup:
Entry: Look for a positive divergence on the Brick Indicator when it goes to -4 or below. Scan left (4-5 sessions) to ensure the price is near a support zone. Enter on a bounce of 2 bricks from the DC LB.
SL: 3 brick-back (i.e. 1 brick below DC LB).
Trail/Exit: I book half at 1:1. For the rest, I move SL to entry and trail until a negative divergence appears between price and Brick Indicator OR exit at 3:20 pm if none of that happens.Observations:
- A divergence happening when the Brick Indicator value is at least -4 or less (-6, -8, -10) is good. Any higher values (-2, 0 etc.) generally result in false signals.
- The DC part is totally objective. Scanning divergence on BI is clear and objective in most instances. Rarely, it can appear subjective but regular practice makes it easier to interpret.
- Using High-Low charts is recommended for Intraday as prices move fast and entry/SL orders can be entered in advance.
Conclusion:
This setup should work very well across instruments and timeframes. I would love to hear feedback/observations from anyone reading this thread and applying it to their trading instrument(s). I will keep posting my charts here regularly.
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How do you read the divergence? Do you follow the direction of BI to take trade? Or is it always a bullish trade when there is a divergence between price and BI?
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Divergences are of 2 types - regular and hidden. Mostly you will find regular divergences, i.e. price has made a LL whereas BI has made a HL. A few times hidden will happen (like today morning, 25400 CE) wherein price has made a HL and BI has made a LL. I will take both.
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Thanks Sundeep for sharing this system. If possible share some more charts as the setup comes in the upcoming trades as well.
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2 trades for the day.
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