I wanted to know how long do you wait after you see divergence to enter a trade. Do you have any rules you follow? (e.g. where would you have entered on your 11/16 5m chart between 10 & 11AM) Please advise.
With divergences, I do not know I have a divergence until I have a confirmed turn in price or a cross of the stochastic lines. For a stochastic indicator cross, I wait until the 5 minute price bar close (or until it’s very obvious the cross will remain because price has moved far enough). You need to be careful because indicators will cross and uncross as price moves around. My confirmed price turns are similar to the Zig indicator where price needs to move a certain percentage before I consider that I have a price turn. On my chart, my turn bars are white, but they do not become white until the market has moved by my calculated percentage. The blue bars are the bars where the price turn is confirmed. The actual entries as similar to all my system entries; the break of the previous bar or the closest daily SR.
Now with the 11/16 divergence, I would not take a trade with that divergence. Why? Two reasons, first price is not pausing or reversing at a daily SR. It’s too far away from the 13086 SR (10 points) for me to consider as a trade setup. Secondly, the stop would need to be set below the 13086 daily SR which would make risk way too large for me personally. Divergences often go back and test the swing low or high (and clear the stops) before making it’s trend change move. With the 11/16 divergence, the best trade is to wait for the first pull back (which is actually trade 3).