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.