Divergence Indicators User Manual

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Copyright © 2007, Adam Burgoyne & Oleg But

Revision 1.0, October 2007

Author : Adam Burgoyne & Oleg But

Website : 5emas-forex-trading-system.com
E-Mail : [email protected]
Publisher : Adam Burgoyne

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 Description

These Custom Indicators have been created to assist you in trading the
TraderBO Divergence system.

The indicators automatically monitor the markets using the basic trade
entry rules for both Long and Short positions.

For short trades

• A bearish divergence has been identified between the price

chart and the selected data plot of the respective indicator
(MACD or Stochastic)

For long trades

• A bullish divergence has been identified between the price chart

and the selected data plot of the respective indicator (MACD or
Stochastic)

If the above conditions have been met then the indicator will display a
dialog confirming the currency that triggered the alert and begin sounding
an audible alarm in addition to marking the chart with a red down-arrow
and red lines or a green up-arrow and green lines as appropriate.

By making use of these indicators, you can dramatically reduce the time
you need to spend watching the market to locate trade opportunities.

Simply by increasing the volume setting on your computer, you can

occupy your time more effectively by doing other things, as long as you
stay within earshot. It is even possible to have alerts e-mailed to you or
sent to your mobile telephone as SMS messages.
Installation

First, ensure that you have installed MetaTrader 4.

If you don’t have it already then you can get a copy free of charge by
requesting a demo account here. You will normally receive a confirmation
e-mail that contains the download instructions for you.

Full installation and configuration details for MT4 are contained in the main
TraderBO Divergence System manual.

Copy the “DivergenceMACD.ex4” and “DivergenceStochastic.ex4”

files (hopefully you downloaded these files to somewhere easy to find, i.e.
your Windows Desktop) to the “experts\indicators” folder of your
MetaTrader 4 installation. If you are using the Finex ProTrader version
then this will be:

C:\Program Files\Finex ProTrader\experts\indicators

If MetaTrader 4 was running when you copied the Custom Indicator files
across then you will need to restart the program before they will be
recognised.
Getting Started

When you launch MT4, you will see the standard interface.

If you updated the profile as suggested in the main 5EMAs FOREX

Trading System manual then your screen will look something like this…

And, if you didn’t, it will look something like this…

The first thing we need to do is go to the Tools – Options menu.

Select the Expert Advisors tab and ensure that the highlighted options
are set as shown.

You may also wish to uncheck “Disable experts when the account has been
changed” and “Disable experts when the profile has been changed” though
this is more of a convenience rather than a requirement.

Click “OK” to continue.

Next, click the small [+] to the left of “Custom Indicators” in the Navigator
pane.

This will expand out the Custom Indicators section to display the available
indicators:

Assuming that you copied the Divergence indicators to the correct folder,
you should be able to see that the list contains our “DivergenceMACD”
and “DivergenceStochastic” indicators along with the many standard
indicators that are provided with MetaTrader 4.

That being the case, the parameter settings for each of the Divergence
indicators can now be explained.
DivergenceMACD Indicator

Left-click and drag the “DivergenceMACD” indicator to a chart.

If everything is correct then you will see a new dialog appear, as below:

The various options are split into sections:

General Details

EnableAlerts:
Turn on/off the alert function. Once you have been alerted to a potential
trade setup, you will want to turn off the audible alert as it is rather
distracting.
EnableEmails:
To use this feature, you will need to configure your e-mail server details
from the Tools - Options menu.

You may need to get your e-mail provider to help you complete the
information required but once it is correctly configured then alerts can be
e-mailed to you as they occur. There are also companies that provide “e-
mail to SMS” services so you may have SMS alerts sent to your mobile
telephone too.

The e-mail parameters screen is shown below:

AuthentiCode:
Please enter your purchase receipt number into this field. Failure to do so
will cause the indicator to disable itself. Do Not Overlook This Point.

If you paid via ClickBank (even if you used PayPal as your funding option)
then enter the ClickBank receipt code from their purchase confirmation e-
mail.

If you paid directly via PayPal, enter the PayPal Transaction ID from their
purchase confirmation e-mail (you can also look up the Transaction ID by
checking your PayPal account history).

Without the correct code, the indicator will be unable to

authenticate with our server and will display a warning in the top-
left of its chart window that it is disabled.

If the “*** Indicator Disabled ***” message appears then type “Ctrl-I” by
holding the “Ctrl” key down and pressing the “I” key to open the
indicators list. Select the relevant Divergence indicator by left-clicking it in
the indicators list then clicking the “Edit” button to open the Inputs dialog
again so that you can enter the correct AuthentiCode details.

You should only need to do this once – if the code has been entered and
accepted then it will be remembered each time you add one of the
Divergence indicators to a new chart.

Important: Authentication will not occur when the markets are closed.

Averaging Periods (MACD Parameters)

FastEMA:
The number of periods over which to calculate the fast EMA of the MACD
indicator.

SlowEMA:
The number of periods over which to calculate the slow EMA of the MACD
indicator.

SignalSMA:
The number of periods over which to calculate the SMA of the signal line of
the MACD indicator.
Select Required Method (Divergence Method)

UseMACD:
When set to True, the MACD indicator line value will be used to identify
divergences.

UseSignal:
When set to True, the Signal indicator line value will be used to identify
divergences.

UseOscillator:
When set to True, the Oscillator indicator line value will be used to identify
divergences.

The indicator will use whichever is the first of the three methods set to
True. If all are set to False then the Oscillator option will be used by
default.
DivergenceStochastic Indicator

Left-click and drag the “DivergenceStochastic” indicator to a chart.

If everything is correct then you will see a new dialog appear, as below:

The various options are split into sections:

General Details

EnableAlerts:
Turn on/off the alert function. Once you have been alerted to a potential
trade setup, you will want to turn off the audible alert as it is rather
distracting.
EnableEmails:
To use this feature, you will need to configure your e-mail server details
from the Tools - Options menu.

You may need to get your e-mail provider to help you complete the
information required but once it is correctly configured then alerts can be
e-mailed to you as they occur. There are also companies that provide “e-
mail to SMS” services so you may have SMS alerts sent to your mobile
telephone too.

The e-mail parameters screen is shown below:

AuthentiCode:
Please enter your purchase receipt number into this field. Failure to do so
will cause the indicator to disable itself. Do Not Overlook This Point.

If you paid via ClickBank (even if you used PayPal as your funding option)
then enter the ClickBank receipt code from their purchase confirmation e-
mail.

If you paid directly via PayPal, enter the PayPal Transaction ID from their
purchase confirmation e-mail (you can also look up the Transaction ID by
checking your PayPal account history).

Without the correct code, the indicator will be unable to

authenticate with our server and will display a warning in the top-
left of its chart window that it is disabled.

If the “*** Indicator Disabled ***” message appears then type “Ctrl-I” by
holding the “Ctrl” key down and pressing the “I” key to open the
indicators list. Select the relevant Divergence indicator by left-clicking it in
the indicators list then clicking the “Edit” button to open the Inputs dialog
again so that you can enter the correct AuthentiCode details.

You should only need to do this once – if the code has been entered and
accepted then it will be remembered each time you add one of the
Divergence indicators to a new chart.

Important: Authentication will not occur when the markets are closed.

Averaging Periods (Stochastic Parameters)

KPeriod:
The number of periods over which to calculate the fast (or %K) line of the
stochastic indicator.

DPeriod:
The number of periods over which to calculate the slow (or %D) line of the
stochastic indicator.

Slowing:
The number of periods over which to calculate the stochastic.
Select Required Method (Divergence Method)

UseMain:
When set to True, the Main indicator line value will be used to identify
divergences.

UseSignal:
When set to True, the Signal indicator line value will be used to identify
divergences.

The indicator will use whichever is the first of the two methods set to True.
If both are set to False then the Signal option will be used by default.
DivergenceMACD and DivergenceStochastic
Indicators

Generally speaking, the default values for both indicators will be fine but
you may wish to specify your own settings for some or all of the criteria in
certain circumstances.

For most users, the only parameters that you may need or want to change
are:

EnableAlerts - activate/deactivate the alerts & audible alarms

EnableEmails - activate/deactivate e-mail notifications

To change them, simply activate the property editor by double-clicking the

value area (the right portion of the parameter line) as shown below and
the property editor will activate.
Once the property editor is active, depending upon the property type, you
will be able to either type in a new value or select from a list of predefined
values.

Clicking anywhere outside of the property editor will update the property
with the new value.

To save and use the new values, click the “OK” button, but not just yet as
the Common tab details should be checked first.
Before continuing, switch across to the “Common” tab and confirm that
the highlighted options are set as shown. If not, adjust them to match the
dialog image below:

Once all the settings are correct, just click “OK”.

If you wish to monitor multiple currencies then simply repeat this process
with other charts.

Okay…time to test everything out…

Going Live

If you have done everything correctly then your chosen chart will have a
new indicator window at the bottom that looks like the one highlighted in
red below:
If, however, your chart has an empty indicator window (as shown below)…

…then you have either forgotten to turn on the “Allow DLL imports” and/or
“Allow import of external experts” options that we covered a little earlier
(so just open the properties dialog and turn them on)…
…or you have entered the wrong AuthentiCode, so just re-enter it.

IMPORTANT: If the expert displays an ”*** Indicator Disabled ***” message in

the top left of its chart window for more than a few moments then press “Ctrl-I”
to open the indicator list then access the properties dialog of the relevant
indicator as explained earlier and re-enter your purchase receipt number in the
AuthentiCode field on the Inputs tab.
The Final Stage

All that is left now is for you to sit and wait!

When the indicator detects a potential trade setup then it will sound a
continuous (until you set EnableAlerts to false) audible alert and display
an information dialog (like the one below) that tells you which currency
pair triggered the alert. If appropriate, it will also send an e-mail
notification.

In addition, indicator arrows will be placed on the indicator window

showing which peak or trough triggered the alert.

Green arrows indicate that the market should move up and red arrows
indicate that the market should move down.

Examples of both are shown in the following screenshots:

Here you can see the red “down arrows” indicating that the market should
begin to move lower, which it does…
…and here you can see the green “up arrows” indicating that the market
should begin to move higher as the following chart confirms…
Well, that’s all there is to it! Everything is now ready for you to begin
trading.

An important fact to remember is that these indicators are designed to

assist you by issuing alerts when certain specified criteria have been met.
They are not designed to provide validated trade entry signals.
After receiving an alert, it is your responsibility to check the charts as per
the strategy and to consider any other current and imminent market
conditions before deciding to open a position.

If you would like to know more about Expert Advisors and Custom
Indicators, including how you can extend and enhance them, then you can
read about it in the MT4 Help System.

Although you don’t necessarily need to use the standard technical

indicators when you are using these Custom Indicators, we certainly
recommend that you do – it never hurts to have additional information
available at a glance to confirm or ward you away from a potential trade
entry!

All that remains is for us to wish you great success in your trading.

Sincerely,

Adam Burgoyne & Oleg But