RSI Divergence Trading Strategy — Transcript

Full transcript

1. 0:00the rsi divergence is literally
2. 0:03like the keystone of all trading
3. 0:05strategies
4. 0:06it should be in your tool belt and i use
5. 0:09it
6. 0:10like literally all the time so in this
7. 0:12video
8. 0:13we're gonna discuss an rsi divergence
9. 0:17[Music]
10. 0:19welcome back to the channel everybody my
11. 0:20name is artie and this
12. 0:22is the moving average the show where we
13. 0:24discuss everything day trading to keep
14. 0:25you
15. 0:26profitable on a consistent basis first
16. 0:28off let me say my vacation
17. 0:30was awesome my tan feels great on my
18. 0:33skin
19. 0:34but i am glad to be back here making
20. 0:36videos for you guys
21. 0:37i seriously seriously needed a break
22. 0:40like
23. 0:40being on the beach all day was ah okay
24. 0:43so
25. 0:44let's just get into the charts because
26. 0:46there's a lot with the rsi
27. 0:48divergence that you guys need to know so
28. 0:50that you don't get
29. 0:51stopped out so that you don't get in too
30. 0:53early like
31. 0:54it's kind of a very delicate thing but
32. 0:57to be
33. 0:58able to spot it correctly and use it oh
34. 1:01man it's serious it's so clutch okay so
35. 1:03first i'm gonna help you guys
36. 1:04set up your screen to look like mine
37. 1:07what you're gonna wanna do
38. 1:09is first put up three moving averages i
39. 1:11like smoothed moving averages those are
40. 1:13different than
41. 1:14simple or exponential smoothed ready
42. 1:18you go to the indicator tab up at the
43. 1:20top here
44. 1:21and you type in smoothed it's in the
45. 1:23built-ins click that three times and
46. 1:25it'll give you three
47. 1:26smoothed moving averages then just
48. 1:28adjust the settings
49. 1:30by changing the inputs to the first one
50. 1:3221 the next 150 the next one 200.
51. 1:35that's going to give you these three
52. 1:36lines here you can make them whatever
53. 1:37color you want the next thing you're
54. 1:39going to want to do is
55. 1:40add an rsi so just type in rsi and it's
56. 1:43again a built-in relative strength index
57. 1:45add that onto your chart keep the input
58. 1:48as 14
59. 1:49source close and style i like to do
60. 1:52this one thing which is going to help
61. 1:54you use the rsi
62. 1:56properly instead of overbought and
63. 1:57oversold which is the wrong way to look
64. 2:00at it
65. 2:00you need to change the upper band and
66. 2:02the lower band to
67. 2:0450 and if you want to keep up with the
68. 2:05color scheme of the channel change the
69. 2:07rsi
70. 2:08line to yellow that way your rsi is
71. 2:10going to look like
72. 2:11this usually there's a line here at the
73. 2:1470 level and a line here at the
74. 2:1630 level signifying overbought and
75. 2:19oversold markets but it's the wrong way
76. 2:21to trade
77. 2:22the rsi because usually when it's
78. 2:24overbought it'll continue
79. 2:25down because there's momentum in that
80. 2:27direction so we're using the rsi
81. 2:29properly
82. 2:30as a momentum indicator showing us
83. 2:32levels below the 50
84. 2:34as down and levels above the 50 as up so
85. 2:38buying and selling okay so once you have
86. 2:40this up let's get you onto a 15 minute
87. 2:43chart that is a
88. 2:44nice middle of the range time frame to
89. 2:47look at
90. 2:47one minute is too noisy and four hour is
91. 2:51just like you're waiting days for a
92. 2:52trade to go through
93. 2:53okay so basically we're looking at the
94. 2:56top
95. 2:57of the markets right here the tops and
96. 2:59the bottoms of the markets
97. 3:01usually when these things happen there
98. 3:04is an
99. 3:04rsi divergence associated with this
100. 3:07so let's just start from right now and
101. 3:09work our way back to a few
102. 3:11examples so what we're looking at at the
103. 3:13top
104. 3:14of the range of the price is higher
105. 3:16highs being formed
106. 3:18while on the rsi lower lows are being
107. 3:22formed
108. 3:22thus creating the divergence showing
109. 3:24that the price might go in the opposite
110. 3:26direction
111. 3:27you can see that clearly here we had a
112. 3:30high and a lower high whereas here we
113. 3:34had
114. 3:34a high and a higher high the issue is
115. 3:37that most people get into
116. 3:39a rsi divergence far too early
117. 3:43they're not waiting for the momentum to
118. 3:45change hands
119. 3:46for example right here we had a high
120. 3:50and a lower high and that happened right
121. 3:53here
122. 3:53and yet the price continued up stick
123. 3:56with me for a little bit i'm gonna
124. 3:57explain
125. 3:57why this is and how to avoid this in
126. 4:00just a few minutes
127. 4:01but i want to get to a few more examples
128. 4:03even on the downside we had
129. 4:05our low and our lower low when on the
130. 4:08rsi we had a low
131. 4:10and a higher low this literally happens
132. 4:13almost every single time that the price
133. 4:16reverses
134. 4:17and again right here like it's
135. 4:20consistent
136. 4:21higher highs right and then right here
137. 4:23we're having lower highs
138. 4:25so how do you avoid getting in right
139. 4:28here and then getting
140. 4:29stopped out right here it's a one-word
141. 4:32answer
142. 4:32wait i'm kidding but patience is very
143. 4:37important when waiting for an rsi
144. 4:39divergence
145. 4:39basically what you're doing is if you
146. 4:42get in too
147. 4:43early you are fighting the momentum
148. 4:45you're like trying to hold back
149. 4:47a river with your bare hands it's not
150. 4:49gonna happen and it's gonna burn you
151. 4:51nine times out of ten
152. 4:52this is probably our best example so
153. 4:54that i can show you
154. 4:56we had this massive bullish momentum
155. 4:58correct like
156. 4:59the rsi went from an 18 up to an
157. 5:0289 in one big swoop
158. 5:06that's momentum when price action is
159. 5:08going
160. 5:09that hard in a direction for you to try
161. 5:11to catch the reverse
162. 5:13is completely stupid at this point your
163. 5:16best bet is going along with it because
164. 5:18it's
165. 5:18so strong in that direction so basically
166. 5:21you're just gonna see this
167. 5:22you're to see it reject and then
168. 5:24continue up and you're just going to
169. 5:26wait
170. 5:26wait for a higher high to be formed and
171. 5:29a lower high to be formed on the rsi
172. 5:32but remember that that momentum is very
173. 5:34very strong
174. 5:35so you have to wait even longer just to
175. 5:38avoid the trap that is probably being
176. 5:40laid for 90
177. 5:41of traders now most people like to think
178. 5:44that once the price action breaks
179. 5:46through a moving average
180. 5:47then it's for sure gonna go down and
181. 5:49continue down and they're safe which is
182. 5:52incorrect because as you can see
183. 5:54right here if i zoom this in the price
184. 5:57broke through the moving average so this
185. 5:58entire candle was red at one point
186. 6:01and then this one started forming and it
187. 6:03was completely red
188. 6:04right here below this moving average and
189. 6:07everyone's like cool it's now rejecting
190. 6:09because we have an rsi divergence
191. 6:11and then what happened it completely
192. 6:13shot up and hit everybody's stop loss
193. 6:15above this high making a higher high and
194. 6:18then
195. 6:19once it had all of its liquidity and was
196. 6:21happy with what it could do
197. 6:23the price tanked after that this thing
198. 6:25is going to help you out
199. 6:27so much because what i want you to do is
200. 6:29wait
201. 6:30wait patiently because what you're doing
202. 6:32is you're seeing a break
203. 6:33of market structure without even knowing
204. 6:35it i'm gonna draw so many squiggly lines
205. 6:37on here right now it's ridiculous so
206. 6:39we've had a
207. 6:40higher high right another higher high
208. 6:42and a higher low
209. 6:44and another higher high all of which
210. 6:46have an
211. 6:47rsi divergence attached with them so you
212. 6:50see this
213. 6:50it's higher highs and higher lows all
214. 6:53the way up then the price starts
215. 6:54cascading down
216. 6:56breaking through the 21 period moving
217. 6:59average
218. 6:59and retesting it and then cascading down
219. 7:02even more below the 50 moving average
220. 7:04at this point right here this is
221. 7:06extremely important remember what i said
222. 7:08about the rsi
223. 7:0950 level if it's above that means
224. 7:12it's bullish and if it's below that
225. 7:14means it's bearish so the rsi level
226. 7:17finally got below the 50 level
227. 7:19showing a downtrend so we have these
228. 7:22lower highs
229. 7:23on the rsi higher highs on the actual
230. 7:26price action
231. 7:27break below the moving averages with a
232. 7:30retest
233. 7:31and trading below the 50 level on the
234. 7:33rsi
235. 7:34now this is your opportunity to get in
236. 7:37people are getting in way too
237. 7:38early on an rsi divergence and they see
238. 7:41one
239. 7:42lower high and they immediately buy
240. 7:44without waiting for the other
241. 7:46confluences
242. 7:47so the confluences that you're looking
243. 7:49for is higher highs
244. 7:51on the price action lower highs on the
245. 7:53rsi
246. 7:54with a break below the 50 level to show
247. 7:57that the trend is actually reversing
248. 8:00and if you can get a retest on a moving
249. 8:02average with that downtrend i mean
250. 8:04you are a safe bet for this trade like
251. 8:07it's just going to go in that direction
252. 8:09so you need to wait
253. 8:10you need to see the structure being
254. 8:13broken what do i mean by that
255. 8:14if you don't know about market structure
256. 8:16please watch this video but essentially
257. 8:18higher highs and lower highs create a
258. 8:21staircase pattern up
259. 8:22and then once it breaks down and we
260. 8:24create a lower
261. 8:26high meaning that we fell below this one
262. 8:28right here that's a break in market
263. 8:30structure
264. 8:30dude this trade has so many confluences
265. 8:33it's ridiculous
266. 8:34so confluence number one right creating
267. 8:37higher highs on the price action
268. 8:39creating lower highs
269. 8:41on the rsi that's your divergence a
270. 8:44break in market structure
271. 8:45a retest on a moving average trading
272. 8:48below the 50 level
273. 8:50on the rsi and last but not least
274. 8:53my absolute favorite trading strategy to
275. 8:57do
276. 8:57a three line strike did you miss it i'm
277. 9:00gonna show you right here
278. 9:01let me get rid of all of these drawings
279. 9:03because it's looking
280. 9:04super messy right now but essentially a
281. 9:07three-line strike
282. 9:08is three subsequent candles in one
283. 9:10direction
284. 9:11and then an engulfing candle in the
285. 9:14opposite direction and we got that right
286. 9:16here
287. 9:17one two three bullish candles
288. 9:21and then a bearish engulfing right there
289. 9:24all of those confluences together
290. 9:26once this candle closes you get in right
291. 9:28here and you ride this sucker down
292. 9:30until you're satisfied with your profits
293. 9:33so in this one trade if you're looking
294. 9:35at rsi
295. 9:36divergence you got stopped out three
296. 9:38times because it kept making higher
297. 9:40highs but if you were patient
298. 9:42and you waited for your confluences you
299. 9:44had one two three four five
300. 9:47six confluences on this trade on a
301. 9:4915-minute chart and if you guys remember
302. 9:51my videos on trading off of the moving
303. 9:53averages
304. 9:54you could have actually targeted the 200
305. 9:56moving average on this trade
306. 9:58knowing that the price was either gonna
307. 10:00go down to it and reject
308. 10:02up continuing that uptrend or actually
309. 10:04reversing off of it and continuing
310. 10:07down past the 200. so taking this trade
311. 10:10off of the close of this three-line
312. 10:12strike
313. 10:13let's see how many pips we would have
314. 10:14gotten on euro usd
315. 10:16right there 45 pips off of a six
316. 10:19confluence trade like that's money in
317. 10:22the bank especially if your lot
318. 10:23sizes are huge you could have made
319. 10:25thousands upon
320. 10:26thousands of dollars off of this one
321. 10:28trade now your question probably is
322. 10:31can i use this on the one minute time
323. 10:32frame because all of my videos about
324. 10:35anything one minute are just blowing up
325. 10:37right now
326. 10:38which is why we've gone from 200 to 700
327. 10:40subscribers
328. 10:41while i was on vacation yes this does
329. 10:44work on a one minute but there is
330. 10:46more noise and more chance for you to
331. 10:49get screwed because you're not looking
332. 10:51at where the price is going on a higher
333. 10:53time frame so if you want to do this on
334. 10:55a one minute you can use the exact same
335. 10:57strategy everything exactly the same
336. 11:00just change the chart to a one minute
337. 11:02but be more mindful
338. 11:04and start your analysis on a higher time
339. 11:07frame like
340. 11:0730 minute one hour 15 minute then work
341. 11:11your way down to make sure you're not
342. 11:12going against this huge uptrend or huge
343. 11:15downtrend the number one thing that i
344. 11:17can tell you right now
345. 11:19is stop doing what you're doing if
346. 11:21you're getting stopped out on an rsi
347. 11:23divergence
348. 11:24it's because you are trying to get in at
349. 11:26the top or
350. 11:28peak or whatever so just stop and wait
351. 11:30and be patient and like
352. 11:32watch the charts it's not like you're
353. 11:33doing anything else just watch the
354. 11:34charts
355. 11:35wait for all the confluences to line up
356. 11:37then make one fantastic trade
357. 11:39at a higher lot size and you're done
358. 11:42like
359. 11:42you've made a ton of money that day
360. 11:45instead of trying to get
361. 11:46five dollars here and six dollars there
362. 11:48and 18 here
363. 11:49you know you could have gotten 800 off
364. 11:52of this one trade if instead of doing 10
365. 11:54small trades you just did
366. 11:55one nice decent sized trade so if you
367. 11:57guys want help with this and you're
368. 11:59seeing these happen on the charts but
369. 12:01you don't know if that's a good entry or
370. 12:02not
371. 12:03join our discord group we got a nice fat
372. 12:05community growing over there
373. 12:07we all post trade ideas we all discuss
374. 12:09with each other and it's just like an
375. 12:11open place to discuss things if
376. 12:13six confluences isn't enough for you and
377. 12:15you want somebody else's opinion on it
378. 12:17take a screenshot and put it on the
379. 12:18discord group i'm on there all the time
380. 12:21i'm happy to answer questions
381. 12:22there are other great traders on there
382. 12:24that are also willing to help out so if
383. 12:26you guys are still watching this video
384. 12:28guess what that means that you actually
385. 12:30like the video so if you wouldn't mind
386. 12:32just hitting that big thumbs up button
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389. 12:36it and if you guys want a
390. 12:37scalping video that is just phenomenal
391. 12:40and has been blowing up like crazy
392. 12:42watch this video right here and again if
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400. 12:56in the next video