Earlier this morning I showed you how to use the binary options to call market tops and bottoms using volume divergence, and ADX indicators. Later today, there was a potential on Gold. In this case, you could not use the binary options for two reasons:
- Expiration was two hours away
- Gold would need to move at least 40 ticks (which it can but not likely today) for an out of the money option with low risk
Using Volume Divergence to Identify Market Tops and Bottoms
So how can I trade what may be a market tops and bottoms on an intraday chart? The scanner highlighted it because there was long divergence on the 45 minute chart and the ADX indicator had a magenta peak coming in. Using the volume divergence indicator for Multicharts with the ADX magenta peak identified a retracement was likely. The distance to the Average True Range Stop was 71 ticks. (To enlarge the image just click on it).
I knew to zero down to the 3 minute chart as there would be a Buddha Trade setup coming in at the Average True Range Stop. Trade came in and I took everything off with 20 ticks per contract. It was flipping the ATR on the 12 minute BUT there was a congestion dot right up above. The volume was indicating a retracement back to the Average True Range Stop indicator, which would take my profits.