Monday, October 5, 2009

Jupiter Signals are Based on a Divergence Trading Strategy

As mentioned in the About Me section, the basis of Jupiter Signals is that of Divergence trades. Divergence occurs when a trend is about to run out of steam, or needs to take a break before continuing on. It is a good strategy for trading retracements and/or trend reversals. I made a PDF document, but for the life of me can't see a post file option anywhere so allow me to cut and paste some of it herein.


Firstly, allow me to thank you for purchasing the Jupiter Signal Service and adding it to your portfolio of Forex trading. Whether it be an individual pair, or the package deal, my goal is to help you further your profitable endeavour in Forex trading.

I have been involved in Forex for the past 4 or 5 years and have watched the Forex markets grow from barely a 1.2 trillion dollar a day flow to its current 4.3 trillion dollar a day flow. There is more than enough pips there for all of us to make a comfortable living.

In my effort to learn as much as I could about Forex, I have spent over $10,000 on books, reports, and courses. The market has “charged” me over $20,000 for me to learn that the market does what it wants, not what I want it to. I have also had the wonderful opportunity to coach up and coming FX traders across the globe. One thing I can say for certain is that there is NO Holy Grail to FX trading. There is hard work and effort. There are many systems that can and do work. FX is wonderful like that, there are literally many, many different ways to successfully trade it – scalping, news trading, fundamental trading, technical trading, etc.

Along my travels in this wonderful world of Forex I realized that there is more than enough pips in the market to make a comfortable living without having to try to get ALL the pips. Based on my experiences, I developed my own system and I present it to you through as Jupiter Signals.

Hereafter, I shall give you a basic overview of the system and how to apply the signal calls to your trading experience.

Thank you again and may I wish you constant pippage!


Jupiter Signals

Jupiter Signals – Divergence Trade Calls

Introduction to Convergence/Divergence

You are driving along the Shuto Expressway, and ahead the Number 2 Highway leads to Meguro. It leads away from your current path, the C1. So Highway 2 is diverging from C1 as it leads away.  Further along, you see an Interchange where cars are joining the Shuto Expressway. They are merging or heading to the Shuto Expressway. They are converging (technically with traffic it is called merging.)

Let’s look at some mathematical expressions. The < sign. If we read left to right, we can see that on the right hand side, the two lines are moving apart. They are diverging.

Conversely, with the > sign, again reading left to right, the two lines are coming together. They are converging.

Now, take one step closer to Forex. In Forex we have price action. Whether it be bars, ticks, or candles, price is generally moving up, down or even sideways. So we can designate the top line in both these cases (<, >) as being price action.

So then, what is the lower line of these expressions? Many people trade Divergence by matching price action against an indicator. (Technically it is Convergence-Divergence, but for short, I will continue to reference it as simply Divergence, but in meaning either case.) Some commonly used indicators are, and not limited to, MACD, Stochastics, CCI, RSI.

Let’s have a look at some examples.

In Pic.1. below we can see an example of CCI Divergence. Price is making higher highs, whilst the CCI Indicator is making lower highs. Price and the indicator are Diverging.

                                           Pic. 1. Price and CCI Divergence.

Furthermore in Pic.2. Stochastic Convergence is evident in Price forming lower highs, whilst Stochastic oscillator signal lines are forming higher highs.

                                          Pic.2. Stochastic Convergence

Divergence As A Trend Reversal Opportunity.

Divergence is a good indication of when a trend is about to reverse, or even retrace somewhat before continuing the current trend. Pic. 3. below identifies Divergence that signifies the end of an uptrend, and following on from that, Divergence again that indicate the end of the subsequent downtrend. Leading onto a third Divergence occurrence.

                                          Pic. 3. Divergence as a Trend Reversal opportunity.

Divergence trading is a consistent method of trading. However, Divergence forming does not always mean that price will reverse. Sometimes it takes Divergence to continue building up before the actual market breaks to the divergent pressure. This is identified below.

Pic. 4. Below signifies a time when Divergence forms, but there is no subsequent retracement or trend reversal. No system is 100% accurate 100% of the time.

 Pic. 4. Divergence doesn’t always play through to sufficient retracement or reversal opportunities. No system is 100% accurate 100% of the time.

Pic. 5. Identifies an example where Divergence builds up before actually following through. Even then, the market then simply proceeded to range. Had you have been looking for a good opportunity to exit, however, Divergence preceding the range was a good indication.

                                           Pic. 5. Divergence building up before following through.

I hope this introduction on Divergence has helped you understand it more. I personally find that there is too much information on Divergence and people look too deeply into it deriving terms for all sorts of cases. Hidden Divergence, Regular Divergence, Common Divergence, whatever! All you need to know is whether Price action is moving to or away from your indicator! KISS is the best policy - Keep It So Simple.

Trading Advice

FX is unfortunately miss-represented by advertising hype and system sellers who will try to paint a dream of being rich tomorrow. You would probably have better luck going to the casino and putting it all on black and leaving it to the spin of the roulette wheel. Trading is not about luck. Like any business endeavour it requires hard work, effort and persistence. With Jupiter Signals, you are able to utilise that hard work and effort put into developing the Jupiter Signals system to add to your current FX portfolio. If you are just starting out in FX, then you will be able to employ Jupiter Signals as your stepping stone into the world of FX.

Change your pattern of thought from the media brainwashing of getting rich quick, to a mindset of one focussed on capital preservation. Consistency is the key to being successful in FX trading. Consistency in mental attitude, consistency in approach to FX trading, consistency in methodology. This and this alone will bring you consistent results.

It is often said that on should never trade with capital they cannot afford to lose. Many misunderstand the meaning behind this thinking that they can be flippant with their approach to FX trading. The true meaning behind this expression is to trade with capital that you are not emotionally tied to. If you are trying to squeeze every last pip out of the market because last month’s rent needs to be paid, then you are on the fast track to blowing up your account (again maybe?) and emotional burnout. That approach to trading is not consistent (apart from consistently making bad trading decisions!), and will keep you in the 95 percentile group of people who leave FX within the first 6months to 1 year of trying it.

Having said that, it is also important to understand that trading systems and methodologies do not produce positive results 100% of the time. Markets have different phases, trending sometimes, ranging another. Some systems work well in certain phases and not so well in others. August 2009 was specifically a difficult time for Jupiter Signals. Call frequency was low and the volatility often caused stop losses to be hit prematurely before going on to profitable trades. This can and does happen. What is important is the consistently applied methodology or system, does, in the overall picture, produce positive results.

Lastly, on an individual level, never expect to be right. Understand that there is no right or wrong in the result of a trade. The market is uncaring about right or wrong. There is good planning of a trade, and waiting for the market to determine if the trade follows through, or doesn’t. If a trade plan doesn’t follow through, fine. Accept it. Move on. This is why consistent application of trading methodology or system is important. Even though the trade didn’t work this time, you know that your system, in the long term, is a winning system.

I sincerely hope that this introductory guide has been of benefit to you, not only in giving an overview of what the Jupiter Signal system is, but also on an individual trading level as well. With a (currently) 4.2 trillion dollar a day flow through the FX markets, there are more than enough pips for us all to live very comfortably.

Happy and successful trading to you.

Kind regards,

Jupiter Signals