intruder

[intruder @into_intraverse]

@framara making it run with my local legit bought copy from the browser is a 200iq move. performance imrpoved, graphics improved, no legal problems. i applaud you, sir will still this idea to my pet project cyberpunk mode ;)

[intruder @into_intraverse]

@framara cant report from the game, but skill images are off on the skill tree

[intruder @into_intraverse]

@framara mind opensourcing so i can join? :)

[intruder @into_intraverse]

@framara take a look at path of diablo (and path of exile of course lol) for how end-game could look alike.

[intruder @into_intraverse]

@balajis Automated tests and APIs are the backend-side "visibility"

[intruder @into_intraverse]

everyone is gangsta and wants a crazy ass girl until she's hanging out with her crazy ass ex

[intruder @into_intraverse]

@PhatAbbot @gainzy222 @WiseMoriarty It's not binary good/bad. You still need ~20-30% kcal from quality carbs for normal body functioning. And <30% is considered low carbs already

[intruder @into_intraverse]

@gainzy222 They're on cocaine nonstop. Otherwise can't see how they don't want to kill themselves after a month or so with no carbs 🙈 esp if you are working out

[intruder @into_intraverse]

When you are stuck, meme outcome is the solution

[intruder @into_intraverse]

@itsyozyy @btc_cfo @TechEmails As a pm with a decade of engineering background I upvote this

[intruder @into_intraverse]

It's magnesium carbonate after all, one of the most abundant and essential mineral 🤷🏻‍♂️

[intruder @into_intraverse]

Remember kids: gym chalk doesn't make you bench more, until you start eating it

[intruder @into_intraverse]

guys, you are not leftists, you are just poor

[intruder @into_intraverse]

@CryptoCred as one wise man said: "your size is not a size lol"

[Cred @CryptoCred]

The Importance of Divergence in Trading

I've had a rough personal week (non-trading related, hard to have a rough week when you trade the 10-year chart) and writing helps me feel better. Sorry for the absence and for the long form. Maybe it helps someone. Or not. It'll help me at least. Here it is anyway.

Some form of divergence is often the cornerstone of good trade ideas.

While technical analysis momentum oscillator sycophants have effectively monopolised the term in trading parlance, divergence has much broader application.

The ordinary definition of divergence is "the situation in which two things become different".

How does this apply to trading?

A lot of trade ideas, at their core, operate on the premise (or assumption) that something is mispriced. More colloquially, that something doesn't add up or is out of line.

If you bet accordingly and you're right, the divergence resolves and become convergence.

A simple example that readers will likely be familiar with is a momentum oscillator (here we go again) standard divergence trade e.g. price making a lower low while the momentum oscillator makes a higher low.

In this instance, the divergence is between price (lower low) and the momentum oscillator (higher low). Up until that stage, those two data points were acting in concert. Now that they are diverging, the implicit assumption is that one of them is wrong.

If you buy and you're right, price will no longer diverge from the momentum oscillator signal and instead converge by moving higher - thus resolving the divergence.

If you buy and you're wrong, price will continue to move lower and the momentum oscillator higher low will converge by also making a lower low - thus resolving the divergence.

In both cases the divergence ultimately gets resolved. One of the signals was 'bluffing', but both outcomes resulted in a convergence.

Essentially, if you think of divergences as "This doesn't add up - which signal is bluffing?" they can give rise to many fruitful avenues for investigation which may form into trade ideas.

A list of some examples, inexhaustive and in no particular order:

1. Price and Momentum (again)

Without rolling with the pigs in debating standard vs hidden divergences, appropriate candlestick lookback periods etc. - the core premise of a standard momentum divergence is that price and the momentum oscillator are offering contradictory signals.

While some divergence signals resolve in an anticlimactic fashion (e.g. price just goes sideways and oscillators 'reset') these setups can give rise to powerful reversal and continuation signals.

Regarding reversals, especially when the setup is formed in tandem with other technical and non-technical factors, the premise of the trade is that the market is rising on weakening buy momentum/falling on weakening sell momentum, and that the divergence will resolve with price aligning with the momentum oscillator.

Regarding continuation - and these setups are especially pertinent in strong trends - the premise of the trade is that the momentum divergence is 'bait' and that the reversal traders will get run over by a strong overarching trend.

There are some nuances with regarding to distinguishing divergence reversal from divergence continuation (overarching trend, proximity to breakout/breakdown level, time frame, shallow retrace/consolidation to 'reset' oscillator values etc.) but they are beyond the scope of this specific article.

In summary, price and momentum are an interesting pair that warrants your attention.

2. Price and Delta

This falls under the broad criterion of 'Advanced Europoor Order Flow Beartard Tools (AEOFBT)' and generally refers to the divergence between price and active order flow tools - particularly delta and (to a lesser extent) CVD.

Delta and CVD essentially outline aggressive market participants' behaviour. The term "aggressive" describes participants willing to cross the spread i.e. execute via market orders.

As per the futures article, this is already an imperfect measure as it's possible (and indeed a frequent occurrence, especially in BTC and ETH) to execute aggressively without specifically using market orders e.g. 'limit take', limit chase, pushing perps around to fill larger spot orders etc. - but let's go with the basic assumptions for now.

Without rewriting said futures article(s), the interesting divergences are between the magnitude of the aggressors' effort and the corresponding price impact.

Generally, delta and price move in concert. Market buyers buy harder than market sellers - number go up. Market sellers sell harder than market buyers - number go down (with a ton of caveats, as usual).

Divergences form when:

1. Market buyers buy hard (either in absolute terms or relative to the recent activity, relative to the range the market is in etc.) but the market barely moves up.

2. Market sellers sell hard (same qualifier) but the market barely moves down.

This can also be imperfectly visualised using CVD e.g. price lower high/delta higher high, or weaker form price higher high/delta lower high.

In both cases, the divergence is between the aggressive participants and their corresponding price impact.

'Under the hood' this is often a result of passive orders absorbing the market orders, with a lot more size to boot.

Like many divergences, it can also resolve in continuation not reversal e.g. instances where price-insensitive insider launches a clip at market, gets soaked up at first by limit orders that don't know any better, and then the news/catalyst comes out and the limit orders get run over.

In summary, divergence between price and delta (broadly defined) can create interesting short to medium-term trade setups.

3. Price and Premium

"Premium" generally refers to the difference between the spot price of an instrument (or a basket of spot prices, creating an index price) and the price of a future, perpetual swap, or other derivative.

Given the latter category offers leverage and is the market's preferred conduit for speculation, one can look at the premium as a measure of both:

1. How much are longs willing to pay to have long exposure?

2. How attractive (in terms of "yield" (lol)) is the short side or the arb trade e.g. buy spot, sell future, collect funding/basis?

Divergences can take many forms here, and as before, I've covered them at length in my futures article on Medium.

In my view, the most powerful versions are:

1. Significant (either in absolute terms or relative to recent numbers) spike in premium + correspondingly weak price action - longs that are paying a lot in funding yet not getting paid in PnL may become paper-handed.

2. Persistent (or even increasing) premium as price declines - either perps buying the dip with leverage or spot leading the nuke by selling harder than perps can keep up with (not great in either case).

3. These can be more or less inverted to get the other side of the trade i.e. funding becoming more negative as price rallies harder or basis getting squashed/perps aggressively selling without price moving lower etc.

In summary, when looking for trade ideas in the relationship between price and futures premia, you can ask: "Is one side of the market paying a lot to hold their positions, and are they getting what they paid for?"

Note: I was going to have a section on Price and Open Interest, but I've covered that exhaustively as its own blog post before. If you want a comprehensive-ish look at funding, CVD, OI etc. - read that article, no use rehashing it here.

4. Price and Sentiment

This one is a bit tricky given there's no 'objective' measure of sentiment. If anything, funding rates/premia are a decent proxy measurement for sentiment, which would take us back to (3).

Additionally, your view of sentiment can be completely skewed depending on your geography, social media algos, group of friends (are they European?), and so on.

Nevertheless, I've seen enough good traders use this imperfect tool as the basis for sound trade ideas.

Divergence between price and sentiment (however defined) can take a few forms, but in my opinion these are the most interesting ones:

1. Price up, sentiment bullish disproportionately.
2. Price down, sentiment bearish disproportionately.
3. Price up, sentiment bearish disproportionately.
4. Price down, sentiment bullish disproportionately.

If I had to subcategorise these, I'd posit that (1) and (2) are reversal-type setups whereas (3) and (4) are continuation-type setups.

For (1) and (2), the divergence is between the fervour of cheerleading the move relative to the size of the move itself. Foaming at the mouth at every slight price movement is a 'tell' for being exceedingly leveraged (or having religious levels of belief in the dominant trend), hence why it tends to crop up at opportune times for reversals.

For (3) and (4), the divergence is between what the market is actually doing and how participants are interpreting it. In essence - disbelief, or apathy given an absolutist belief in the dominant trend. Up in a bear market? Dead cat bounce. You fell for it. This will end like every green candle has ended. Full retrace. Down in a bull market? This red candle is God's gift to man. Every 0.1% pullback is generational. Buying anything red will free you from serfdom.

In summary, this one is a bit slippery, but divergence between price and sentiment when the sentiment is particularly entrenched (and socially accepted/rewarded, while the 'other side' is shunned) can offer interesting trade ideas.

5. Price and News

Divergence between price and news is consistently one of the best trade setups in crypto.

More often than not, the market's reaction to the news is more informative than the news itself.

In a strong uptrend, random fluff nonsense that looks half-bullish can send asset prices soaring. The same news would barely have any impact in a bear market.

In a strong downtrend, anything remotely negative can crater the token price. Even bullish news can lead to lower prices if it's sufficiently priced in, underwhelming, or attracts enough buyers in a market hungry for exit liquidity.

In my view, when it comes to price and news divergence, there are 4 strong setups and 2 weak setups.

Strong setups:

1. Good news in a strong uptrend stops having positive market impact/starts being sold.

2. Bad news in a strong downtrend stops having negative market impact/starts getting bought.

3. Bad news in a strong uptrend has minimal impact/gets absorbed immediately.

4. Good news in a strong downtrend has minimal impact/gets absorbed immediately.

(1) and (2) generally work best at macro inflection points to hint towards reversal of the dominant trend, whereas (3) and (4) generally work best when things speed up in a new dominant trend i.e. (1) and (2) are late cycle signals of reversal, whereas (3) and (4) are more early-mid cycle signals of continuation. Tons of caveats, as usual.

Weak setups:

5. Good news in a strong uptrend has visibly less positive impact.

6. Bad news in a strong downtrend has visibly less negative impact.

(1)-(4) are categorised as "strong" because they present a stronger divergence between price and news - the market is doing the opposite of what the news would ordinarily cause.

(5) and (6) are categorized as "weak" (in relative terms) because they are not so much an explicit divergence, but more so a signal that market participants are becoming less sensitive to the impact of news and/or that a lot of the good or bad stuff has been priced in.

In summary, price and news is really worth your time - it is relevant on a multitude of time frames and can be used as confluence for a range of trade ideas (as well forming trade ideas on its own).

6. Relative Strength

Initially I planned to do a separate point on pairs trading i.e. Walmart stat arb by looking at strong/weak pairs in a closely correlated basket of instruments, but relative strength as a catch-all is probably more helpful.

The divergence here is simple: it is between the returns (positive or negative) of a given instrument or group of instruments relative to the rest of the market.

In a Hsakaesque fashion, it is finding the stuff that is strong during broad market weakness and inferring (or assuming, if you're less epistemologically generous) that said stuff will also be strong once the market mean reverts.

Colloquially, "If this thing is strong when everything is weak, imagine how strong it'll be when everything bounces!"

We can get into nerdy window-dressing explanation of how strength during market weakness can be indicative of passive, layered bids from smarter participants who are less sensitive to downside volatility, using relative strength as a proxy measurement for market attention, and so on but it all circles to the same point - divergence between a certain instrument (or closely correlated basket) and the rest of the market can highlight pockets of strength.

It works the other way around too (albeit to a lesser extent) i.e. stuff that's weak during market weakness will probably be weak on the bounce, but there are weird exceptions to this e.g. if it was strong previously, tons of new OI and aggressive buyers at the top, market flushes, top buyers get liqd and their liqs push price significantly lower than it would be otherwise --> "OMG relative weakness" (it's actually not, it's just liqs) --> bounces hard --> wow it was relatively weak but bounced hard, Cred's dumb essay was a scam I wished he stayed off Twitter.

In summary, divergence between specific instruments or baskets relative to the market's mean returns (or even intrabasket if you want to get bougie with it) can serve as an effective filter when trading a market with near infinite altcoins.

Conclusion

As mentioned in the beginning, this list is by no means exhaustive and is riddled with assumptions, oversimplification, and is unnecessarily verbose in places.

But hopefully it gets you thinking about how to structure some trade ideas.

In any case, I feel better having written this and hope it helps.

Too long; didn't read
I ain't reading all that. I'm happy for u tho. Or sorry that happened.

[intruder @into_intraverse]

@CryptoCred Happy birthday and best wishes mate 🥳💗

[intruder @into_intraverse]

@CryptoCred Sharing the knowledge for free with no paid courses. Legend🫡

[intruder @into_intraverse]

@CryptoCred @donalt Let's call it inverse uptrend

[intruder @into_intraverse]

@PrivatEquityGuy People tend to ignore small actions, and greatly underestimate their long-term consequences. It's an exponential growth of these small steps, and we're not used to that