The Trading Strategy I Trust Most — Transcript

Full transcript

1. 0:00In this video, I'm going to do a deep
2. 0:01dive into my RSI divergence strategy on
3. 0:05a 1-minute time frame. This is like
4. 0:08super scalping. Now, yesterday I made a
5. 0:10video about my top three day trading
6. 0:13strategies that I use very consistently,
7. 0:15but not one over the other, kind of all
8. 0:18at the same time. When I see that setup,
9. 0:20I go for it. This is the in-depth
10. 0:22version of the RSI divergence, and you
11. 0:25can use it on lower time frames like the
12. 0:271-minute. And I'm going to show you the
13. 0:29last week of price action on EUR/USD so
14. 0:33that you can consider this trading
15. 0:34strategy for yourself. But, there are
16. 0:37some secret sauces that I'm going to
17. 0:39sprinkle on here that are going to give
18. 0:41you more confirmation so that you don't
19. 0:43take useless divergences. Not only that,
20. 0:47I'm going to tell you where to put your
21. 0:49stop loss. So, let's get into it. All
22. 0:52right, so on the chart right now, we got
23. 0:53EUR/USD on a 1-minute time frame. Now,
24. 0:57I'm going to explain my divergence
25. 0:59strategy to you using the pen tool. This
26. 1:03is very, very simplistic. When you have
27. 1:06market structure that is bullish, it
28. 1:08looks like this. There are higher highs
29. 1:10and higher lows. The RSI should
30. 1:13theoretically be doing the same thing if
31. 1:17the momentum is strong and wants to
32. 1:18continue upwards. However, sometimes
33. 1:22when market structure is bullish and the
34. 1:24RSI is also proving that momentum, but
35. 1:27then the buyers are no longer interested
36. 1:30in buying at that price. It is too high,
37. 1:33so they have a loss of momentum in the
38. 1:36RSI. So, you can see we had a higher
39. 1:39high in price on the candlestick chart,
40. 1:43but on the RSI, we had a lower high,
41. 1:47meaning a loss of momentum. This is a
42. 1:50typical bearish divergence, a regular
43. 1:53bearish divergence. Sorry, I need my
44. 1:55glasses.
45. 1:56Homeboy's getting old. Now, not all
46. 1:59divergences are created equal. I've
47. 2:01personally seen a bajillion divergences
48. 2:05in my life, and one consistent theme
49. 2:07that I've seen about the divergences
50. 2:10that work, that are trend reversal
51. 2:12divergences that actually give you a
52. 2:14decent move out of it, worth taking, is
53. 2:17this, and I call it my secret sauce.
54. 2:19When you have the RSI high that starts
55. 2:23the divergence outside of the 70/30
56. 2:26range, and then the next one is within
57. 2:28the 70/30 range, that is the secret
58. 2:31sauce divergence that I want you to go
59. 2:33at. It happens over and over again.
60. 2:36Sometimes it's very faint, but you can
61. 2:38clearly see a loss of buying power or
62. 2:41selling power, depending on the trend.
63. 2:43So, for my line drawing example, this is
64. 2:46what the RSI should look like. You have
65. 2:48the higher highs, but then when you
66. 2:49create a lower high, it needs to be
67. 2:51within the 70/30 range. This upper line
68. 2:54is the 70, the lower line is the 30. And
69. 2:56just so you guys can clearly see, we
70. 2:58also can do this on bearish momentum,
71. 3:02where the RSI should equally match the
72. 3:05price action, but sometimes it doesn't,
73. 3:08and you get a low and a lower low, and
74. 3:10then a higher low. Price is showing
75. 3:13bearish, but people are no longer
76. 3:16interested in selling, so the momentum
77. 3:18goes away. Again, that second divergence
78. 3:22needs to be within the 70/30 range.
79. 3:26Again, the upper level is the 70, the
80. 3:28lower one is the 30. This higher low is
81. 3:31above that 30 level. Now that we've got
82. 3:34that situated, I'm going to show you
83. 3:36EUR/USD
84. 3:37over the last 7 days on the 1-minute
85. 3:40chart, and I've got my divergences
86. 3:41marked up, as well as a position tool on
87. 3:44each one of these trades, and I'm going
88. 3:46to get into the stop loss and take
89. 3:48profit structure of each one of these
90. 3:50later in the video. So, as you can see,
91. 3:52this example right here, price was
92. 3:54making bearish structure. We have the
93. 3:56lower low, and on the RSI, we have a
94. 3:59higher low. That is a regular bullish
95. 4:02divergence. So, for this, it's going to
96. 4:04be a regular buy. Once you see a
97. 4:06rejection wick or a rejection sequence
98. 4:09of candles, like this one right here,
99. 4:11you can clearly see a very long wick and
100. 4:14then a bullish candle up. That is your
101. 4:16entry candle. You will be entering the
102. 4:18position here, and because this is a
103. 4:201-minute chart, you are not looking for
104. 4:22these monstrous moves. You are looking
105. 4:25for scalps that you can get in and out
106. 4:26of the market within 10 minutes,
107. 4:29sometimes 15. Now, I'm going to show you
108. 4:31all these examples first, and then I'm
109. 4:34going to show you how to place your stop
110. 4:35loss and where to put your take profit.
111. 4:37Now, this next example is a little bit
112. 4:39different. Sometimes price makes a
113. 4:42double top or a double bottom. Now, if
114. 4:44we go back to a line drawing, a double
115. 4:47top will look something like this in
116. 4:50price. And the RSI should technically do
117. 4:53the exact same thing, but sometimes it
118. 4:55doesn't. This is again my secret sauce.
119. 4:59RSI will make
120. 5:01the equal price structure in accordance
121. 5:03with what price is doing, but then when
122. 5:05a double top is formed or a double
123. 5:07bottom is formed, the next RSI peak is
124. 5:12going to show that there's a loss of
125. 5:14momentum. So, we have equal highs right
126. 5:16here, yet the RSI is not showing that.
127. 5:19This shows a loss of momentum and is
128. 5:21also a divergence. That's where this
129. 5:24trade comes in. We create that double
130. 5:26top, we have a candle formation, and
131. 5:28when these candle formations happen on
132. 5:30the top or the bottom of price action,
133. 5:33it is known as a doji style candle.
134. 5:35That's basically a wick on top and
135. 5:37bottom with a tiny little body in the
136. 5:39middle of it. So, we get a formation
137. 5:41like that, we enter our sell position,
138. 5:43and continue on with our lives. Another
139. 5:45regular bearish divergence. Price made a
140. 5:48higher high. The RSI was peaked out of
141. 5:50the 70/30 range then within the 70/30
142. 5:53range. Again, price made a lower low,
143. 5:56bullish divergence, as you can see on
144. 5:58the chart, outside of the 70/30 range,
145. 6:01inside the 70/30 range. We take our long
146. 6:04position. Now, you can see here there is
147. 6:06a trade setup, but I did not take this
148. 6:09trade. Why is that? Because I've
149. 6:11realized, depending on what asset you're
150. 6:14trading, there's a specific time window
151. 6:17that you should test in that has the
152. 6:20best results, the highest percentage of
153. 6:23winning trades. So, for me and this
154. 6:26strategy on EUR/USD,
155. 6:28Tokyo session is actually quite good,
156. 6:31but closer to the window of the
157. 6:33overnight server reboot change from
158. 6:36midnight to 1:00 a.m. kind of halt
159. 6:38pausing for that 30 minutes, that's not
160. 6:41a good area. There's too much
161. 6:43uncertainty there, and I've noticed a
162. 6:45lot of losing trades there. So, what
163. 6:47I've done for this specific setup on
164. 6:50EUR/USD is from 2:00 a.m. my time to
165. 6:54[clears throat] noon my time, just after
166. 6:56London open, basically. That gives me
167. 6:58nice steady non-manipulated price
168. 7:01movement over Tokyo session and gets me
169. 7:03a little bit into the morning volatility
170. 7:06of the London session. Then, I'm done
171. 7:08for the day. I don't want to deal with
172. 7:09it anymore. So, you can see a few of
173. 7:11these trades that don't work out during
174. 7:13my window that I'm not interested in
175. 7:15trading, and then the next day we get
176. 7:17back into my window. Not all trades are
177. 7:19winners, but the risk to reward helps me
178. 7:21mitigate those losers and earn it back
179. 7:24through my winning trades because I'm
180. 7:25trading a 1:2 risk to reward ratio here.
181. 7:28So, I've shown you regular bullish
182. 7:30divergences, double top bearish
183. 7:33divergences, regular bearish
184. 7:35divergences, areas where I don't like to
185. 7:37trade even though the setup is there,
186. 7:40and you can clearly see this is not a
187. 7:42100% win rate strategy, but the
188. 7:44statistics are very healthy, especially
189. 7:47with the risk to reward ratio. Now,
190. 7:49scrolling back through the last week of
191. 7:51price action, you can see how many
192. 7:54trades met the requirements and how many
193. 7:57trades fell outside of my trading window
194. 8:00that I was not interested in trading.
195. 8:02Overall, on Euro USD over the last 7
196. 8:06days, there was a total of 33 trades.
197. 8:10And of those 33 trades, using this
198. 8:13specific formula, we had 17 winners and
199. 8:1616 losers. But, because the risk to
200. 8:18reward ratio was so good, we had a
201. 8:20profit factor of two. So, for every
202. 8:23dollar you lose, you get two back. Now,
203. 8:26you guys are probably extremely curious.
204. 8:28Where am I putting my stop loss and why?
205. 8:30If you add the free indicator from
206. 8:32TradingView called the average true
207. 8:35range, at any given time, the average
208. 8:38true range shows you at that price, when
209. 8:42that candle forms, the average range of
210. 8:45pips that can occur in a normal
211. 8:48non-volatile market is going to be the
212. 8:50ATR. So, on this specific candle, if you
213. 8:53look on the bottom right-hand side of
214. 8:55the screen right here, right in this
215. 8:56area, you can see on that candle, the
216. 8:59average true range was one pip. Now, I
217. 9:03use an ATR multiplier of 1.5, meaning
218. 9:07that if the average true range on that
219. 9:09single candle was one pip, my stop loss
220. 9:13is 1.5. In order to execute this, you
221. 9:16need zero spreads and zero commissions,
222. 9:19and that depends solely on the broker
223. 9:21that you're using. That is why this
224. 9:221-minute scalping strategy will not work
225. 9:25for everybody. But, if you got a great
226. 9:27broker and you like fast price
227. 9:29movements, this is going to work
228. 9:31fantastic. 1.5 * ATR is usually a good
229. 9:35point for any stop loss for most
230. 9:37strategies. Now, I do not recommend that
231. 9:3999% of day traders use this strategy on
232. 9:43a 1-minute timeframe. I would prefer
233. 9:46that you use it on a higher timeframe.
234. 9:48One, because it's safer. Two, because
235. 9:52you get more time to enter in a trade.
236. 9:54These 1-minute candles fire quickly, and
237. 9:57if you're not instantaneous with this,
238. 10:00and you don't have hot keys triggered on
239. 10:01your MT5 to immediately enter trades,
240. 10:04this is not going to be suitable for
241. 10:06you. But, I wanted to show you that it's
242. 10:08possible on the 1-minute timeframe, and
243. 10:10now I'm going to show you how lethal it
244. 10:13is if you're doing it on a higher
245. 10:15timeframe, like I showed in yesterday's
246. 10:17video, where I made a ridiculous amount
247. 10:20of money trading Bitcoin. So, if we look
248. 10:23at Bitcoin on the 1-week chart, like I
249. 10:26did in yesterday's video, this shows you
250. 10:29every single one of those regular
251. 10:31divergences at the tops of the market
252. 10:34and the bottoms of the market. And
253. 10:36executing trades with a 1.5 * ATR on
254. 10:40this as your stop loss, you would have
255. 10:42safely captured every single one of
256. 10:44these. Now, for this example right here
257. 10:46at the top of the recent cycle, you
258. 10:49would have captured a 25,000
259. 10:51point drop in Bitcoin. It went from
260. 10:54114,000
261. 10:55to 188,000.
262. 10:57And right here, you would have got into
263. 10:59Bitcoin at 65,000,
264. 11:02and your take profit price would have
265. 11:03been 87,000. I don't think it's going to
266. 11:05get there, and I'll explain why in just
267. 11:07a second, kind of as an added bonus to
268. 11:09this video. You can see these higher
269. 11:11timeframe price movements and RSI
270. 11:13divergences
271. 11:14are absolutely my bread and butter when
272. 11:18I'm trading crypto. This little reversal
273. 11:20right here, 67,000 down to 49,000. Even
274. 11:23though it wasn't the top of the market,
275. 11:25you still were able to get that massive
276. 11:28retracement. Now, the reason I don't
277. 11:30like this bullish divergence right here,
278. 11:32and why I don't think price is going to
279. 11:33continue up is because if you know
280. 11:35anything about hidden divergences, you
281. 11:37can see price is making lower lows and
282. 11:39lower highs. But the RSI was making
283. 11:42lower lows and lower highs except for
284. 11:44this one right here. This, if it rejects
285. 11:46in this area, is going to be a hidden
286. 11:49bearish divergence. Again, just my
287. 11:51conspiracy theories that the market is
288. 11:53going to collapse, but what do I know,
289. 11:55right? Anyway, if you guys like this
290. 11:57video, please share it with your
291. 11:58friends. Thank you so much for watching
292. 12:00and we will see you in the next one.