The ZoneTraderPro Tick Divergence Trade

With the ZoneTraderPro Version 3.0 software release a very exciting trading pattern was introduced, the TICK Divergence pattern trade. The eSignal version of the software featured a pattern called the counter trend trade. A counter trend trade occurred when the market traded at a blue zone you see on the ZoneTraderPro charts. In over 1800 trades, 50% had no adverse excursion meaning that the market traded right to the blue zone and reversed.

In only 13% of the trades, did you see adverse excursion meet or exceed 4 ticks or more. However, the average win had fewer ticks of profit, and a typical winning trade had just 6-7 ticks of profit. This 6-7 ticks represented profit taking from the smart money and then the trend resuming.  Every time the blue zone was hit the market retraced marginally and does not present appropriate risk/reward. 

The Tick Divergence trade was created when it was discovered that these trades led to winning trades with a better reward than a standard counter trend trade. 

Order Flow Tick Divergence
Order Flow Tick Divergence. The Exhaustion trade does not appear because of the different chart settings
Tick Divergence Exhaustion
Tick Divergence Exhaustion.
Tick Divergence
Tick Divergence

The TICK Divergence pattern is different because it is a real time measurement of the buyers and sellers in the NYSE cash market. The divergence is created when the smart money traders try to get retail traders to enter into a move after it has been exhausted. The additional trading in the futures is not supported in the cash market. As a result you can see a higher average win in these trades.

When the pattern is combined with an exhaustion trading pattern the results are even better, because he exhaustion is usually marking the market top or market bottom. Thus we see these trades go from blue zone to blue zone. 

To the right we see a series of trades with a Tick Divergence pattern marking the high. We are using all of our indicators here and all 3 trades setup perfectly.

Why is this important? The ZoneTraderPro blog details how you make a trading plan. A trading plan has to address the three issues a trader will face. Where do you get into a trade, where do you get out, and what do you do once you have entered a trade.

For example, taking a trade after a Tick Divergence or Exhaustion pattern has extremely high risk. With a trading plan you would know this and know to avoid the exhaustion trend long trade.

Tick Divergence Trade

What is so impressive about this pattern is the quantity of these high quality trades along with their lower risk and higher reward. Check out the ZoneTraderPro Blog for current examples of TICK Divergence trades and how the Power and Accumulation Distribution indicators are used in the trades.