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Trading Strategies: Best Ways We Use Divergence To Earn Profit
– Divergence:
o Going in opposite direction, ‘diverging’ from the mean (center)
o When the price rises, and the indicator falls (regular divergence)
o When the indicator rises and the price does not (hidden divergence)
o EXAMPLE:
Crude Oil price is rising, but momentum is pointing down
• Expect the market to reverse b/c the indicator is the one we need to rely on
Crude oil is flat, and the momentum is rising, price should begin to rise.
o Example:
Big buyers on the tape, but momentum is falling (pointing down)
• FOLLOW THE BIG money so looking for a long trade, momentum will soon catch up.
o Easiest way to make MONEY with divergence is at the highs or the lows of the day
We test the highs on gold futures, and at the highs we see buyers, but momentum is now pointing down on multiple timeframes
Divergence = price rising, momentum falling
Look for the short entry with a price reversal pattern (2-step) knowing that the price will soon follow
– Why do we watch different timeframes for our entries?
o Multiple timeframes are a very key component to any professional trader’s toolbox
o I want to demonstrate this method on ANY timeframe
o Scalpers use the 4-range or the 8-range
o Day traders will use the 8 and 13-range charts
o Swing and position trades will use the 21, 34, 13-range
– What do I do after the Fast Track?
o So you’ve spent 2 weeks on the fast track
o You’ve earned consistent profit
o You’ve learned a lot about you as a trader and now you have the confidence to start growing your account.
o Depending on your account size, we begin to get more aggressive, more moving parts
Fast Track = 1 target and 1 stop
Day traders = scaling out of your trades with 3 profit targets
• Be placing your stop according to the market environment.
Email JJ@schooloftrade.com and give me the basics of your new situation
• Size of your account
• The markets you want to trade
• The times you can trade
• We will review this in members training this Wednesday.
If youre doing really well with the fast track, I don’t blame you, stick with it, and just add more size to your orders.
• Every new $1000 you earn you can move up another contract.
– How do we manage our trades as members?
o DOM?
Can be easier, just use whatever you feel most comfortable with.
o Trade Management Chart?
I like the TMC the most because I can easily see the MACD and the Pink Line which we use for our trade management
It gives me a visual of price action
– What happens if the price moves past your entry level?
o We are all prepared for the trade, but then all of a sudden the price spikes and I miss the entry
Don’t chase more than 5 ticks from your potential entry
Wait for the next pattern to develop
– Different Chart Types:
o Range Charts, my preference
– What time do we trade?
o Our method will work on anytime frame, and any time of the day
o I focus my attention on the US morning
– Where do you place your stop?
– When we roll over on crude oil, does that effect anything else?
o Not really, except for the simple fact that people will avoid crude oil on contract rollover day and look to trade other markets, which will add volume to other markets.