User Guide – Cross Market Divergence Indicator

User Guide – Cross Market Divergence Indicator

The following release notes are for the Cross Market Divergence Indicator.

Quick Setup

Place the divergence indicator onto the required chart and enter the symbol of the market you want to compare – e.g AUDJPY. Enter the symbol exactly as it appears in the MarketWatch. Important: If the markets are inversed make sure that the “inverse” setting is used. If you don’t know whether the “Inverse” setting should be used, check the histogram (black solid graph) in the lower window. If it’s mostly above zero, don’t use inverse. If it’s mostly below zero, use inverse.

The default settings are good for H4 charts. You will need to adjust the settings for lower/higher timeframes and different markets.

Market divergence indicator, showing output markers
Market divergence indicator, showing output markers © forexop

Settings which are time-dependent include:

1 “Check divergence over this many bars”
2 “Divergence percent (at least)”

Alerts can be created and these will notify you of any new buy/sell events that appear on the chart. Mobile and email alerts will only be sent if you have this option set up in MetaTrader, otherwise it will be ignored.

Output signal

The indicator will output a trade signal according to the input settings. This will output set values for buy/sell signals for both the chart symbol and the compare symbol.

Signal/Mode Description
0 Short period correlation coefficient
1 Long period correlation coefficient
2 Buy signal: -0.5=Buy main symbol, -1=Buy compare symbol
3 Sell signal: +0.5=Sell main symbol, +1=Sell compare symbol

Open Metatrader’s data window (CTRL+D) to show the signal values. You can hover with the mouse cursor over any point to display the value in the data window.

Data window showing signal outputs
Data window showing signal outputs © forexop

The buy/sell signals are set to the predefined “empty values” setting when no marker is shown.

Input Settings

Input setting Comment
Enter symbol to compare Compare this symbol with the main chart symbol
Is this the leader market? Is compare symbol the leader or follower?
Invert the compare symbol? Invert the compare symbol (yes/no)?
Correlation period The short correlation period
Corr multiplier (for longer period line) The long correlation period
Histogram color Color setting
Line color main symbol Color setting
Line color compare symbol Color setting
Line color for upper leg Color setting
Line color for lower leg Color setting
Color for buy arrow Color setting
Color for buy arrow Color setting
Check divergence over this many bars The duration in bars over which correlation events are checked
Divergence percent (at least) Markets must diverge by at least this amount before flag
Ignore divergence if correlation below this Don’t flag divergences where correlation is below this figure
Send terminal alerts? Alert on any new divergence event (buy/sell)
Send email alerts? Send an email on divergence event (through Metatrader terminal)
Send mobile push notifications? Send text alert on divergence event (through Metatrader terminal)
Min. interval between alerts (seconds) Alert no more than this many seconds (prevents rapid alerts)
Output trade signal? Output the buy/sell arrows onto the chart (yes/no)?

The only mandatory setting is the compare symbol. Enter the compare symbol exactly as it appears in the MarketWatch window. The other settings have defaults which should be suitable for the H4 chart. Adjust the settings accordingly for smaller or larger timeframes. The “divergence percent” will usually need to be lowered for smaller timeframes and increased for larger timeframes.

Check there is actually correlation between the markets in the lower window. The indicator will only give meaningful results were a strong and consistent correlation exists between the two markets. The correlation can be either negative or positive. With a negative correlation, switch the “Invert” setting on.

By default the indicator assumes that the main symbol is the primary (leader market) and the compare symbol is the subordinate (follower market). This can be switched in the settings box to make the compare symbol the leader market.

Indicator input settings
Indicator input settings © forexop

Display

The indicator will display the text and arrows on the chart if this setting is switched on. The labels are set according to the initial window size. If you resize the chart or switch chart or timeframes, and the labels appear out of alignment, just refresh the indicator by opening the settings box.

For further information please see the product page and several articles on the website which describe various divergence strategies.

Resources

Video: https://www.youtube.com/watch?v=6yl0aobFwmw
Technical divergence: http://forexop.com/strategy/divergence-trade/
Technical divergence indicator: http://forexop.com/products/mt4indicators/7247/