A fellow trader here on Trading View needed some help with a trade he is taking. Commonly when an RSI makes a new LOW and price makes an opposing HIGH this is called a "Bearish Divergence" When this happens, its expected that price will follow and make new Lows or start moving down.
But what happens when price continues to move up? Why would it go against the momentum of the all mighty RSI? How is it possible that price can reject what the RSI wants to do?
Well the answer is VOLUME and who is in control of it. The Bulls or the Bears...and whomever is in control, will always win.
In this video you'll see something else to look out for when trading divergences so you can predicts which way price will breakout.
I needed this video, I saw the same issues, luckily you explained it perfectly again and I gaine even more confidence in the strat. If you see a Def at the 15 min, do you go to the lower time frames to look for Def there as well, eg 15-5-1 min time frame? And if so, which one do you use to trade? Thank you for all your work!
CoffeeshopCrypto
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@BoldorXL, always do you ur analysis on a high time frame and your trades on the lower otherwise you will enter into a trade that will take a REALLY long time to complete and will have the ability to have more forces at play against it.
BoldorXL
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@CoffeeshopCrypto, Thx for your response. Have to say somtimes it's hard to go from high to low time fram, sieeng other div's makes it more contradictory. So I think I stick with high timeframe and only entring with the low timeframe break.
CoffeeshopCrypto
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@BoldorXL, on the high timeframe where you find the divergence Mark it and draw out your ZONE then switch timeframes Only look at the divergence contained to the candles within your ZONE you drew out
This way you filter out any other divergences. There will be A LOT but you focus on one.
Thank you for all your work!