every single day trader has losses when
they're starting out and i can tell you
with certainty that
99 of my losses when i was starting
was because i could not spot the
divergence so in this video i'm gonna
show you exactly how to enter
every single one of your trades based on
a divergence that's going to give you a
very high probability of success
[Music]
welcome back to the channel everybody my
name's artie and this is the moving
average a show where we discuss
everything day trading to keep you
profitable on a consistent basis
if you guys have watched my previous
videos you guys know that i've lost
lots of money in the forex markets when
i was first starting out
i didn't let those losses keep me from
continuing my
education and getting better and better
day in and day out
now i trade profitably on a consistent
basis
and 99.999 percent of my success
is due to spotting a divergence whether
it's a bullish or
bearish regular divergence or a bullish
or bearish
hidden divergence i can see them every
single time
because it's all that i look for so
let's jump into the charts and i'm going
to show you
examples of every single one of these
and how to trade
off of the divergence all right first
thing that you're going to want to do
is get on the charts on trading view you
can find a link
down below to the website it's
tradingview.com what you want to do
is get on the cryptocurrency or the
indicy or the 4x
pair that you trade most often and look
at it
on a one hour time frame we're not going
to put any other indicators on here
except for the rsi but we're not going
to use the standard rsi settings i want
you to adjust them like i have
so click on the indicators tab and type
in rsi
it is in the built-ins it is the
relative strength index
put a star next to it you want it on
every single one of your charts
and click it once once it's up on your
chart you're gonna see the indicator
down here on the bottom it's gonna look
different than mine but here's how you
can adjust your settings
click the settings wheel right here
leave the length at 14
and change the style i like yellow
because that's the color theme of the
channel so you can change your rsi color
to yellow
and you're going to change the upper
band and lower band to 50 and 50
making it a solid line not a dotted line
then your rsi will
look exactly like mine the reason we're
doing it this way is because looking at
the market as
overbought or oversold is the wrong way
to trade the rsi the rsi is a momentum
indicator it is showing momentum in a
specific direction
likewise it also shows a loss of
momentum
in a certain direction and that's where
the divergences come into effect
so the first divergence example i want
to show you
is a regular bullish divergence you can
see that the price was coming down for
quite a period of time
every single time creating a new lower
low
all the way down to here as these lows
continue to form
my eye is always going to the rsi to
spot
a big fat divergence this is how to
catch
a solid trend reversal so as you can see
here the price created a lower low
but on the rsi the rsi level
of this bottom was 19 and for this
bottom it was 21 meaning that the
downwards momentum that the price
action is showing is no longer valid
because
it's got a loss of momentum it's higher
up on the relative
strength index at this point it started
to reject
and come up now what i want you to do
for entries is
watch a solid rejection this candle is
too small for a rejection so you want to
wait for a subsequent candle in that
direction
at that point you can put in your order
with a stop loss below the wick of this
candle at the bottom here now what i
want you to do when you're first
starting out
is set your risk to reward ratio for a
one to two
meaning that your risk is one and your
reward is two
once this target hits i want you to
close ninety percent of your
trade move your stop loss for the
remaining
ten percent into profit so it's a
completely 100
risk-free trade and let that thing ride
until you're comfortable with your
profits
don't be greedy take your profits when
you can if you're new
just take 100 of the trade right here at
a one to two so that's how to spot a
trend reversal with a divergence on the
way up now this
is an example of a regular bearish
divergence you can see the price was
climbing up
creating higher highs consistently and
then at this higher high we had a
rejection two rejection candles off of
this high
so again my eye goes to the rsi and we
see a
lower high on the rsi this is another
divergence but this divergence
means it's going to go down again
putting in your short position here
at the close of the second candle with
your stop loss
above the previous high targeting a one
to two risk to reward ratio
again once you get out of being a
beginner day trader you can continue to
hold these trades depending
on the strength of the movement what i
mean by that is seeing these big
fat red candles shows a lot of momentum
in that direction
but again i want you to close 90 of your
trade at your normal take profit level
and then
let the rest ride so just to clarify we
had a higher high
in the price action but a lower high in
the rsi
now there are two other types of
divergences
and these are the ones if you are new i
want you to only
use these they are hidden divergences
now the reason i say if you are new
because
the number one rule in day trading and
any forex trading trading
cryptocurrencies
is the trend is your friend always trade
with the trend
this is going to give you the highest
probability of success
the issue is how do you know if a trend
is going to continue
or reverse that's when the hidden
divergences come into play so instead of
waiting for a reversal
we are actually going to trade with the
trend looking for these hidden
divergences
this is an example of a hidden bullish
divergence you can see that the price
was making higher lows but on the rsi
it was making a lower low now let me
explain how this works
the momentum was going up correct as it
went up and started to come down
it became more oversold at this point
than it was at this point
meaning that we are in an uptrend but at
this point it is
more oversold so if something is
oversold
it should continue up so we get this big
fat rejection candle and these are the
ones that are the strongest
instead of waiting for two you can trade
just off of this one
go in for your long position targeting
the bottom of that big move candle and
going for a one to two risk to reward
ratio
now the other hidden divergence is on
the downside it is a hidden bearish
divergence
the price is going down creating these
lower highs yet at this point on the rsi
it was much higher meaning that the
market at that point was
more overbought than it was at the
previous high
when something is overbought that means
some selling should occur
so that is your signal for the trend
continuation down and again we got this
big
fat rejection candle and you could have
traded off of that
on your short position targeting the top
of that candle as your stop loss
going for a one to two risk to reward
ratio now
how much could you have made off of
every single one of these trades that i
just showed you
on this this is euro australian dollar
and with this one move you got 36 pips
on australian dollar u.s dollar which is
the hidden bullish divergence
you would have gotten 41 pips on this
one move now the regular divergences
that i showed you were both
on indices one was on us 30 and one was
on
the german 30. this one move right here
this one to two risk to reward ratio
got you a hundred point move on an
index using a 0.01 lot
size on this move this is a hundred
dollars profit with a 50
risk on us 30 we had that regular
bullish divergence
this is a 321
point move with a 158 point
stop loss so again on a 0.01
depending on your contract size this
could have profited you
321 dollars and that was just in a few
hours
now all this analysis was done on the
one hour time frame
and i suggest you do this on a higher
time frame because these divergences
hold more weight than they would on the
five minute or the one minute
the concept still works the same on
every single time frame
you just need to be more aware of the
fact that there are more
false signals on lower time frames now
when it comes to
false signals this is how you can
actually prevent yourself from getting
in
on a false signal and waiting for more
confirmation and more confluence
using a trend line on these trend
reversal trades
so it's only for the regular bullish
divergence
or the regular bearish divergence trades
i'm going to get rid of my order
position right here and what we're going
to do
is actually draw a trend line i have a
trend line drawn here to show you
the lower low and the higher low on the
rsi
but what we're gonna do is draw a trend
line
on this price action as the price is
continuing down it is maintaining a
trend so you draw a trend line across
the tops of the highs
and once the price actually breaks
through that trend line
and you're getting the divergence here
on the rsi
at this point we've broken the trend
and the trend is reversing because we
can see that in the rsi with the
divergence
so at this point is when you can get
into your long position
always wait for the close of the candle
because the close of the candle
is more concrete than waiting until it's
almost closed
because it could wick back down being a
false
breakout of the trend again let me show
you this on
the german 30 drawing a trend line
across the bottoms of the price
action you can see that once we broke
out of that trend we came up to retest
rejected down and formed a new trend
causing a trend reversal and
that would have been your entry point so
you probably would have waited for this
big fat rejection candle
again targeting your stop loss above the
high
of that candle also if you guys are
still watching this video that means
that you like the video so make sure
you're dropping a like down below
every single time i see a trade setup
the first thing i do is stop and i don't
click those buttons
i look for divergences and i look for
breaks in trend lines i look for regular
or
hidden divergences to see if my analysis
was correct
on that you can see that i'm not using
any other indicators
except for price action and the rsi but
genuinely
i get so many dms and so many messages
on our discord group of people showing
me their analysis
on a divergence and it's always off just
a little bit so this is going to be
the ultimate bullish and bearish regular
and hidden divergence lesson that you're
ever going to need
if you don't fully understand it just
yet re-watch this video a few times
until you've got it implanted
into your brain just trading this one
strategy
period is going to give you so much
success
and so much profits in your account you
will literally have your mind
blown and if you guys want to use this
same divergence strategy
looking and trading a double top check
out this video right here it breaks down
exactly how to trade a double top and if
you guys enjoyed this video and you like
the way that i teach
make sure you're subscribed to the
channel by clicking this button right
here
thank you so much for watching and we
will see you in the next video