Divergence Trading Strategy — Transcript

Full transcript

1. 0:00every single day trader has losses when
2. 0:02they're starting out and i can tell you
3. 0:04with certainty that
4. 0:0599 of my losses when i was starting
5. 0:08was because i could not spot the
6. 0:10divergence so in this video i'm gonna
7. 0:12show you exactly how to enter
8. 0:14every single one of your trades based on
9. 0:17a divergence that's going to give you a
10. 0:18very high probability of success
11. 0:22[Music]
12. 0:24welcome back to the channel everybody my
13. 0:25name's artie and this is the moving
14. 0:27average a show where we discuss
15. 0:29everything day trading to keep you
16. 0:30profitable on a consistent basis
17. 0:32if you guys have watched my previous
18. 0:34videos you guys know that i've lost
19. 0:36lots of money in the forex markets when
20. 0:39i was first starting out
21. 0:40i didn't let those losses keep me from
22. 0:43continuing my
23. 0:44education and getting better and better
24. 0:46day in and day out
25. 0:47now i trade profitably on a consistent
26. 0:49basis
27. 0:50and 99.999 percent of my success
28. 0:55is due to spotting a divergence whether
29. 0:57it's a bullish or
30. 0:59bearish regular divergence or a bullish
31. 1:01or bearish
32. 1:02hidden divergence i can see them every
33. 1:05single time
34. 1:06because it's all that i look for so
35. 1:08let's jump into the charts and i'm going
36. 1:10to show you
37. 1:10examples of every single one of these
38. 1:13and how to trade
39. 1:14off of the divergence all right first
40. 1:15thing that you're going to want to do
41. 1:17is get on the charts on trading view you
42. 1:19can find a link
43. 1:20down below to the website it's
44. 1:22tradingview.com what you want to do
45. 1:24is get on the cryptocurrency or the
46. 1:26indicy or the 4x
47. 1:28pair that you trade most often and look
48. 1:31at it
49. 1:31on a one hour time frame we're not going
50. 1:34to put any other indicators on here
51. 1:36except for the rsi but we're not going
52. 1:39to use the standard rsi settings i want
53. 1:41you to adjust them like i have
54. 1:43so click on the indicators tab and type
55. 1:46in rsi
56. 1:47it is in the built-ins it is the
57. 1:48relative strength index
58. 1:50put a star next to it you want it on
59. 1:52every single one of your charts
60. 1:54and click it once once it's up on your
61. 1:56chart you're gonna see the indicator
62. 1:57down here on the bottom it's gonna look
63. 1:59different than mine but here's how you
64. 2:01can adjust your settings
65. 2:02click the settings wheel right here
66. 2:04leave the length at 14
67. 2:06and change the style i like yellow
68. 2:08because that's the color theme of the
69. 2:10channel so you can change your rsi color
70. 2:12to yellow
71. 2:13and you're going to change the upper
72. 2:14band and lower band to 50 and 50
73. 2:17making it a solid line not a dotted line
74. 2:20then your rsi will
75. 2:22look exactly like mine the reason we're
76. 2:24doing it this way is because looking at
77. 2:25the market as
78. 2:26overbought or oversold is the wrong way
79. 2:30to trade the rsi the rsi is a momentum
80. 2:33indicator it is showing momentum in a
81. 2:35specific direction
82. 2:36likewise it also shows a loss of
83. 2:39momentum
84. 2:39in a certain direction and that's where
85. 2:41the divergences come into effect
86. 2:43so the first divergence example i want
87. 2:45to show you
88. 2:46is a regular bullish divergence you can
89. 2:49see that the price was coming down for
90. 2:51quite a period of time
91. 2:53every single time creating a new lower
92. 2:56low
93. 2:57all the way down to here as these lows
94. 3:00continue to form
95. 3:01my eye is always going to the rsi to
96. 3:04spot
97. 3:05a big fat divergence this is how to
98. 3:08catch
99. 3:08a solid trend reversal so as you can see
100. 3:11here the price created a lower low
101. 3:13but on the rsi the rsi level
102. 3:17of this bottom was 19 and for this
103. 3:20bottom it was 21 meaning that the
104. 3:23downwards momentum that the price
105. 3:25action is showing is no longer valid
106. 3:28because
107. 3:28it's got a loss of momentum it's higher
108. 3:30up on the relative
109. 3:32strength index at this point it started
110. 3:34to reject
111. 3:35and come up now what i want you to do
112. 3:37for entries is
113. 3:38watch a solid rejection this candle is
114. 3:40too small for a rejection so you want to
115. 3:43wait for a subsequent candle in that
116. 3:45direction
117. 3:46at that point you can put in your order
118. 3:50with a stop loss below the wick of this
119. 3:53candle at the bottom here now what i
120. 3:55want you to do when you're first
121. 3:56starting out
122. 3:57is set your risk to reward ratio for a
123. 4:00one to two
124. 4:01meaning that your risk is one and your
125. 4:03reward is two
126. 4:04once this target hits i want you to
127. 4:07close ninety percent of your
128. 4:08trade move your stop loss for the
129. 4:11remaining
130. 4:12ten percent into profit so it's a
131. 4:14completely 100
132. 4:15risk-free trade and let that thing ride
133. 4:18until you're comfortable with your
134. 4:20profits
135. 4:21don't be greedy take your profits when
136. 4:22you can if you're new
137. 4:24just take 100 of the trade right here at
138. 4:27a one to two so that's how to spot a
139. 4:29trend reversal with a divergence on the
140. 4:31way up now this
141. 4:32is an example of a regular bearish
142. 4:34divergence you can see the price was
143. 4:36climbing up
144. 4:37creating higher highs consistently and
145. 4:39then at this higher high we had a
146. 4:42rejection two rejection candles off of
147. 4:44this high
148. 4:45so again my eye goes to the rsi and we
149. 4:48see a
150. 4:49lower high on the rsi this is another
151. 4:52divergence but this divergence
152. 4:54means it's going to go down again
153. 4:56putting in your short position here
154. 4:58at the close of the second candle with
155. 5:01your stop loss
156. 5:02above the previous high targeting a one
157. 5:05to two risk to reward ratio
158. 5:07again once you get out of being a
159. 5:09beginner day trader you can continue to
160. 5:11hold these trades depending
161. 5:13on the strength of the movement what i
162. 5:15mean by that is seeing these big
163. 5:17fat red candles shows a lot of momentum
164. 5:20in that direction
165. 5:21but again i want you to close 90 of your
166. 5:24trade at your normal take profit level
167. 5:26and then
168. 5:27let the rest ride so just to clarify we
169. 5:29had a higher high
170. 5:31in the price action but a lower high in
171. 5:33the rsi
172. 5:34now there are two other types of
173. 5:36divergences
174. 5:37and these are the ones if you are new i
175. 5:40want you to only
176. 5:41use these they are hidden divergences
177. 5:44now the reason i say if you are new
178. 5:47because
179. 5:48the number one rule in day trading and
180. 5:50any forex trading trading
181. 5:52cryptocurrencies
182. 5:54is the trend is your friend always trade
183. 5:56with the trend
184. 5:58this is going to give you the highest
185. 5:59probability of success
186. 6:01the issue is how do you know if a trend
187. 6:03is going to continue
188. 6:04or reverse that's when the hidden
189. 6:06divergences come into play so instead of
190. 6:08waiting for a reversal
191. 6:10we are actually going to trade with the
192. 6:12trend looking for these hidden
193. 6:14divergences
194. 6:15this is an example of a hidden bullish
195. 6:17divergence you can see that the price
196. 6:20was making higher lows but on the rsi
197. 6:24it was making a lower low now let me
198. 6:27explain how this works
199. 6:28the momentum was going up correct as it
200. 6:31went up and started to come down
201. 6:33it became more oversold at this point
202. 6:37than it was at this point
203. 6:38meaning that we are in an uptrend but at
204. 6:41this point it is
205. 6:42more oversold so if something is
206. 6:45oversold
207. 6:46it should continue up so we get this big
208. 6:49fat rejection candle and these are the
209. 6:50ones that are the strongest
210. 6:52instead of waiting for two you can trade
211. 6:54just off of this one
212. 6:55go in for your long position targeting
213. 6:58the bottom of that big move candle and
214. 7:01going for a one to two risk to reward
215. 7:03ratio
216. 7:04now the other hidden divergence is on
217. 7:06the downside it is a hidden bearish
218. 7:08divergence
219. 7:09the price is going down creating these
220. 7:12lower highs yet at this point on the rsi
221. 7:16it was much higher meaning that the
222. 7:18market at that point was
223. 7:20more overbought than it was at the
224. 7:22previous high
225. 7:23when something is overbought that means
226. 7:25some selling should occur
227. 7:26so that is your signal for the trend
228. 7:28continuation down and again we got this
229. 7:31big
230. 7:32fat rejection candle and you could have
231. 7:33traded off of that
232. 7:35on your short position targeting the top
233. 7:38of that candle as your stop loss
234. 7:40going for a one to two risk to reward
235. 7:43ratio now
236. 7:44how much could you have made off of
237. 7:46every single one of these trades that i
238. 7:48just showed you
239. 7:49on this this is euro australian dollar
240. 7:52and with this one move you got 36 pips
241. 7:55on australian dollar u.s dollar which is
242. 7:58the hidden bullish divergence
243. 8:00you would have gotten 41 pips on this
244. 8:02one move now the regular divergences
245. 8:04that i showed you were both
246. 8:06on indices one was on us 30 and one was
247. 8:09on
248. 8:09the german 30. this one move right here
249. 8:12this one to two risk to reward ratio
250. 8:14got you a hundred point move on an
251. 8:18index using a 0.01 lot
252. 8:21size on this move this is a hundred
253. 8:24dollars profit with a 50
254. 8:26risk on us 30 we had that regular
255. 8:29bullish divergence
256. 8:30this is a 321
257. 8:33point move with a 158 point
258. 8:36stop loss so again on a 0.01
259. 8:40depending on your contract size this
260. 8:42could have profited you
261. 8:43321 dollars and that was just in a few
262. 8:46hours
263. 8:47now all this analysis was done on the
264. 8:49one hour time frame
265. 8:50and i suggest you do this on a higher
266. 8:53time frame because these divergences
267. 8:55hold more weight than they would on the
268. 8:58five minute or the one minute
269. 9:00the concept still works the same on
270. 9:02every single time frame
271. 9:03you just need to be more aware of the
272. 9:05fact that there are more
273. 9:07false signals on lower time frames now
274. 9:10when it comes to
275. 9:11false signals this is how you can
276. 9:13actually prevent yourself from getting
277. 9:15in
278. 9:16on a false signal and waiting for more
279. 9:19confirmation and more confluence
280. 9:21using a trend line on these trend
281. 9:23reversal trades
282. 9:25so it's only for the regular bullish
283. 9:27divergence
284. 9:28or the regular bearish divergence trades
285. 9:30i'm going to get rid of my order
286. 9:32position right here and what we're going
287. 9:34to do
288. 9:34is actually draw a trend line i have a
289. 9:37trend line drawn here to show you
290. 9:39the lower low and the higher low on the
291. 9:41rsi
292. 9:42but what we're gonna do is draw a trend
293. 9:45line
294. 9:45on this price action as the price is
295. 9:48continuing down it is maintaining a
296. 9:51trend so you draw a trend line across
297. 9:54the tops of the highs
298. 9:56and once the price actually breaks
299. 9:58through that trend line
300. 10:00and you're getting the divergence here
301. 10:02on the rsi
302. 10:04at this point we've broken the trend
303. 10:07and the trend is reversing because we
304. 10:10can see that in the rsi with the
305. 10:12divergence
306. 10:13so at this point is when you can get
307. 10:15into your long position
308. 10:16always wait for the close of the candle
309. 10:19because the close of the candle
310. 10:21is more concrete than waiting until it's
311. 10:23almost closed
312. 10:24because it could wick back down being a
313. 10:27false
314. 10:27breakout of the trend again let me show
315. 10:30you this on
316. 10:31the german 30 drawing a trend line
317. 10:33across the bottoms of the price
318. 10:36action you can see that once we broke
319. 10:38out of that trend we came up to retest
320. 10:41rejected down and formed a new trend
321. 10:43causing a trend reversal and
322. 10:46that would have been your entry point so
323. 10:47you probably would have waited for this
324. 10:49big fat rejection candle
325. 10:51again targeting your stop loss above the
326. 10:54high
327. 10:54of that candle also if you guys are
328. 10:56still watching this video that means
329. 10:58that you like the video so make sure
330. 10:59you're dropping a like down below
331. 11:00every single time i see a trade setup
332. 11:04the first thing i do is stop and i don't
333. 11:06click those buttons
334. 11:08i look for divergences and i look for
335. 11:10breaks in trend lines i look for regular
336. 11:12or
337. 11:12hidden divergences to see if my analysis
338. 11:16was correct
339. 11:17on that you can see that i'm not using
340. 11:19any other indicators
341. 11:20except for price action and the rsi but
342. 11:24genuinely
343. 11:24i get so many dms and so many messages
344. 11:28on our discord group of people showing
345. 11:30me their analysis
346. 11:31on a divergence and it's always off just
347. 11:34a little bit so this is going to be
348. 11:36the ultimate bullish and bearish regular
349. 11:39and hidden divergence lesson that you're
350. 11:41ever going to need
351. 11:42if you don't fully understand it just
352. 11:44yet re-watch this video a few times
353. 11:46until you've got it implanted
354. 11:48into your brain just trading this one
355. 11:51strategy
356. 11:52period is going to give you so much
357. 11:54success
358. 11:55and so much profits in your account you
359. 11:58will literally have your mind
360. 11:59blown and if you guys want to use this
361. 12:02same divergence strategy
362. 12:04looking and trading a double top check
363. 12:07out this video right here it breaks down
364. 12:10exactly how to trade a double top and if
365. 12:12you guys enjoyed this video and you like
366. 12:14the way that i teach
367. 12:15make sure you're subscribed to the
368. 12:16channel by clicking this button right
369. 12:18here
370. 12:18thank you so much for watching and we
371. 12:20will see you in the next video