Divergence Trading Strategy with RSI
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Thread: Divergence Trading Strategy with RSI

  1. #1
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    Divergence Trading Strategy with RSI

    Trading divergence is really helpful, here I will explain how I trade it with the use of relative strength index, although this strategy is not fail proof but with the proper money management you are sure to make something from it.

    So in the chart below you can see where I have labeled the different scenarios that could happen in the forex market, this is a chart of eur jpy H4, when I see that price is forming higher high and notice that rsi is forming lower high, then I know that it is time to sell.

    In the case of a buy, I watch out for price to form lower lows and the relative strength index to begin forming higher lows then I recognize that I need to watch out for buying opportunities, from my experience, the divergence trading is a leading strategy, meaning it will usually give us the signal way before it happens, but sometimes these signals can be fake, but when we take the ones that comes from the 4 hour and above, we have a better accurate trades, using this on the 15 minutes time frame might produce lesser performance for you. Please drop any questions you may have and I will answer them.


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  2. #2
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    divergence with rsi can make trading good if the trader knows how to find the divergence with rsi and so he can be able to make some money and enjoy trading, rsi is a good indicator for determination of the divergence and the trader can make continuous money with it and big profits if he trades with the higher time frames.

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  3. #3
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    Quote Originally Posted by sameeh View Post
    divergence with rsi can make trading good if the trader knows how to find the divergence with rsi and so he can be able to make some money and enjoy trading, rsi is a good indicator for determination of the divergence and the trader can make continuous money with it and big profits if he trades with the higher time frames.
    Relative strength index just removes some of the ambiguity that comes with trading divergence, there are different variables people use for this strategy, some choose the macd which is the default indicator that spots divergence at a go, while others use the stochastic, I just prefer this rsi because of its peculiar behavior and characteristics which I think offers unique opportunities.

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  4. #4
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    rsi is good if we can use it but not all time, you are not sure about your strategy also so you are saying need of good management otherwise its risky, its good but there is no strategy characteristics, kindly share some more information about your strategy what need to use and what need to avoid

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  5. #5
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    Trading divergence is not that easy, you could be caught into something that is so wrong, I don't subscribe to trading this strategy all by itself without any form of extra care, it will be better that you have a candlestick pattern or something that gives you better understanding of the market, that is how you can be sure about what to do, rsi looks good from your post Leonvic.

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  6. #6
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    Ehis, candlestick pattern is not good then this actually, i am the person who traded here for a long term on scalping, almost 6-7 month used scalping with candlestick pattern but still get loss, so i quit from candlestick pattern, i learn many patterns on different situations so try to move to other strategy

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  7. #7
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    I trade the relative strength index only that I don't use it as a means of getting the point of divergence in the market, instead I use it literally to find when price is behaving on a manner that tells me there is volatility in the market and I must remain on it, sometimes this works well and at some other point I get seriously disappointed from trading but generally I am of the opinion that rsi is one of best trading tools out there.

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  8. #8
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    Do you use other indicators for confirmation and or as a filter? I'm also a fan of divergence strategies, but usually I don't use RSI to detect divergences, I just used another stochastic indicators, so I think your strategy is looking new to me. Do you follow all the divergence signals that come from the indicator? Usually I take divergence signal only near support / resistance.

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  9. #9
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    Quote Originally Posted by naeem555 View Post
    Ehis, candlestick pattern is not good then this actually, i am the person who traded here for a long term on scalping, almost 6-7 month used scalping with candlestick pattern but still get loss, so i quit from candlestick pattern, i learn many patterns on different situations so try to move to other strategy
    Oh I see, we cannot trade one strategy continually even when it is obvious that we are not making head way with it, I am happy that you understood that it was not working and immediately did something about it, there are many people that will just run with the assumption that everything is fine and then become frustrated after losing their accounts repeatedly to margin call.

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  10. #10
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    Quote Originally Posted by ara View Post
    Do you use other indicators for confirmation and or as a filter? I'm also a fan of divergence strategies, but usually I don't use RSI to detect divergences, I just used another stochastic indicators, so I think your strategy is looking new to me. Do you follow all the divergence signals that come from the indicator? Usually I take divergence signal only near support / resistance.
    I don't really use any indicator to filter my trades, the way I achieve this filtering is to pick only trades that comes near an areas of strong support and resistance, if we see a very good divergence from these levels, that is an extra sign that the trade signal that has just been generated is going to be strong, when I see such opportunities, I am more relaxed knowing that it is going to be a good ride.

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