Wow, thanks for all of the great advise everyone. I haven't been back to this post in a week or so, I was on vacation, but I am going to look deeper into what you all have said and hopefully create a good personal system based around some of it.
I originally made this post, because I thought I noticed a good pattern for trading divergence.
I know it sounds crazy, but I was looking at 1 minute GBP/USD charts, using 12, 26, 9 MACD and using PSAR with .12 step to enter divergence calls.
If I saw divergence on the 1 minute chart, I would enter the trade on the start of the second PSAR dot and go for a 20 pip TP. When I first started testing this, it was great. It was making alot of winning trades. I was setting the stop losses 2 pips above the last highest peak or lowest peak (depending on bullish or bearish divergence). So on a 1 min chart it was on average only 6-9 pips away from my PSAR entry point of divergence.
Like I said, it was working great for a few weeks, and then started crapping out. I tediously back tested 8 months of 1 minute charts and although you would have made pips, it would have been very frustrating. The system does not work during days where there are long trends or big movements.
That's why I was asking a way to isolate good and bad divergence calls.
Now I know 1 minute charts are crazy to trade off of, but it's fun
I personally think that there can be some validity to my system, it just needs some fine tuning.
Thanks again for everyone's help.
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