What is RD pattern?
Continuing from the last article, I will introduce another trend follow pattern in Woodies CCI.
This time, I will introduce a pattern called “RD” (Reverse Divergence) that uses the appearance of so-called “Hidden Divergence (or Reversal)”.
To understand RD strategy, it’s important to understand what “Hidden Divergence (Reversal)”‘ is and how it differs from normal divergence.
The RD pattern is a pattern in which when the “Hidden Divergence (Reversal)” appears, a trend line is drawn on the CCI line, and the entry is made when the CCI cross the trend line.
Example Chart of RD pattern
Please take a look at example chart below.
First, please notice the two red trend lines drawn on both the chart and the Woodies CCI.
The red line which connects two bottoms in the chart is rising, while the red line which connects two bottoms of CCI is falling, it suggests “Hidden Divergence (Reversal)”. Unlike (normal) Divergence, Hidden Divergence is a signal that imply continued trend.
In the RD pattern, when Hidden Divergence appears, draw a trend line (blue line in the above figure) that connects the mountain of the CCI line (this is not a valley but a mountain), and when the CCI line crosses the trend line is entry timing (at the red vertical line in the figure above).
In the case of the above chart, the timing when the CCI line crosses the trend line and the timing when the CCI line crosses the minus 100 line are almost the same. If CCI crosses the minus 100 line first, it may be possible to enter earlier at that time.
According to the official reference, it is possible to enter 20 seconds before the bar is confirmed, without waiting for the bar to be confirmed.
I’ll explain the timing of exiting in later article.
My articles have the following structure.
Woodies CCI – Strategy Analysis (1) Basic
Woodies CCI – Strategy Analysis (2) ZLR trade pattern
Woodies CCI – Strategy Analysis (3) RD trade pattern
Woodies CCI – Strategy Analysis (4) TLB and HTLB trade pattern, Exiting
Woodies CCI – Strategy Analysis (5) Famir, Vegas, and Ghost trade pattern
Woodies CCI – Strategy Analysis (6) FFE, TLB, and HTLB trade pattern (counter trend)