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Timeframe Divergencewhen the fast chart disagrees with the slow one

Evidence: WeakIntermediateMulti-timeframe · Counter-trend

Every page so far has required the timeframes to agree. This one trades the disagreement: the daily trend is up, the hourly is stretched and turning down, and the trade is the short.

It is the most requested multi-timeframe idea and the least supportable. The honest framing is that you are taking a counter-trend trade and using the word 'divergence' to make it sound systematic. It is included with that said plainly, and rated Weak.

Two timeframes are not two opinions. A daily chart and an hourly chart of the same instrument contain the same prices — the higher one is useful when it supplies something the lower one cannot see, and decorative when it only repeats it.

Category
Multi-timeframe · Counter-trend
Timeframe
D1 trend · H1 signal
Suitable pairs
Instruments that range rather than trend — EURGBP, AUDNZD
Session
London and New York
Indicators / tools
RSI(14) on H1 · EMA(50) on D1 · ATR(14) on H1

Valid setup

MT-04 · TIMEFRAME DIVERGENCE — VALID SETUP AUDNZD · H1 · a higher high in price against a lower high in RSI — and a daily trend that disagrees with the trade SHORT 0.85108 0.85253 0.85398 0.85544 0.85689 0.85834 0.85979 TARGET = 2R, fixed 1R STOP = above the divergent high + 0.5 × ATR(14) ENTRY = H1 close below the divergent candle's low TARGET — fixed, never trailed 1 2 3 0.85895 0.85700 0.85310 RSI(14) — the second peak is lower while price is higher 70 50 ① First price high, with the RSI at its own high ② Higher price high — but a LOWER RSI high ③ The daily trend is up. This trade is against it ④ Close below the divergent candle — one attempt only ⑤ Half normal size: the evidence is half normal ⑥ Fixed target, twelve-bar time stop, no exceptions

Exact rules

Entry

  • Daily: price well above its EMA(50) — the trend this trade is against.
  • Hourly: price makes a higher high while RSI(14) makes a lower high. Both highs must be at least ten bars apart, or you are reading noise.
  • Trigger: an H1 close back below the low of the divergent high's candle.
  • Maximum one attempt. Divergence can persist for a very long time in a real trend and repeated attempts against one are how an account is destroyed.

Stop loss

  • Above the divergent high, plus 0.5 × ATR(14) on H1.
  • Tight and absolute. If price takes out that high, the divergence has been resolved upward and there is nothing left of the idea.
  • Risk 0.25%–0.5%. Half the normal size, because the page's rating is half the normal confidence.

Take profit / exit

  • A fixed target: 2R, and nothing else. No discretion about where the move 'should' go.
  • No trailing, no letting it run into a swing trade. This is a counter-trend scalp with a specific destination.
  • Time stop at twelve hourly bars. If the reversal has not happened by then it is not happening.

Build Timeframe Divergence

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Trading carries risk and most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade. The chart is an illustration of the rules on constructed candles — it is not a record of a trade and not a backtest.