The best divergence indicator for trading futures and forex is the Volume Divergence indicator by TradersHelpDesk. The volume divergence indicators measures volume divergence for TradeStation and Multicharts that identifies divergence in trends and retracements. Traders can use the indicator to identify market tops or bottoms, as well as for low risk entries at the ATR or a slow moving average. Additionally, our ADX and RSI indicators have built-in divergence algorithms, as well.
Best Divergence Indicator for Trading Futures & Forex
For example, the TradeStation RadarScreen image below shows that while there is not any trend divergence at the moment, there is volume divergence on the following markets and timeframes:
- Nasdaq 12 minute chart is approaching the slow moving average with volume indicating an upward movement
- Nasdaq 720 minute chart has short divergence as it is approaching the Trend ATR
- Dow Jones 12 minute char has long divergence as it is approaching the 12 minute chart
Once the TradersHelpDesk Volume Divergence indicator identifies the divergence on the TradeStation RadarScreen, then the trader can verify the volume divergence using the Direction Volume with Delta on the chart. In the example below, using the 80 period slow moving average, the trader can easily identify that as price approaches the slow moving average (blue line), instead of sellers increasing as they should on a new low, they are decreasing. The red line on the Directional Volume with Delta identifies the decreasing volume on the lows. Click on chart to expand.
Of course, as any trader knows, divergence can be tricky especially when trying to identify market tops and bottoms. The best divergence indicator is not a single indicator but multiple indicators that confirm the market top or bottom. This is why we have built-in a divergence algorithm in most of our indicators, ie the ADX and RSI indicators both identify divergence by plotting either red or green dots that connect the highs and lows.