Learn to Trade using RSI Divergence & Price Action (Improve Trading accuracy with Divergence)

Trading with RSI Divergence helps you improve your trading accuracy,
You can use divergence with any trading strategy!
Here I show you How to Trade using RSI Divergence & Price Action!

This video focuses on Trading using RSI Divergence and price action,
There are 2 main ways to use RSI Divergence - Reversal trades and breakout trades!
rsi divergence trading strategy is very easy and can be used along with any other strategy as well!

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Transcript -

Ladies and gentlemen today we are gonna talk about a really important indicator in trading and that's RSI, you'll be learning about RSI divergence and I'll show you in a minute why it's such an important tool for your trades.

But before that let me establish how I'll be using price action for taking trades.

Now there are mainly 2 kinds of price action trades, reversal and breakout trades .. I'm slightly more inclined to taking reversal trades as it's more reliable .. However this works with both.

Here for example we have a channel pattern and when we have a closer look, we can see here around the point where we are expecting a reversal we see the price going up but the RSI is going down. The RSI is diverging from the price which is why we call it divergence.

So what's the significance of divergence?
The RSI indicates the buying power of the price, and what happens when the buying power reduces? The price falls down.

Here during the previous reversal point as well, if you can see the price is going up but the RSI is coming slightly down.

Which basically indicates the price is loosing it's power and it has a clean reversal

And again if we go back, we see here the price is going up but the RSI is coming down, A clean divergence and again we have a good reversal.

So the RSI is just an indicator, all it does is give a slight indication. So you should take your trades based on price action and use the help of RSI and other such indicators to indicate what might happen, Not the other way round.

Now just like reversal candles, Divergence is to be used only around reversal points.

However we can use divergence for finding out breakouts as well.

Now before I get to breakouts ... I would like to welcome you to the Telegram group we launched where traders & Investors gets market updates and can discuss anything related to trading & Investing!

Alright .. Breakouts!

Here we have a pattern with a breakout and RSI as well is going along with the price, everything looks normal right.

Except the breakout in the RSI happened around here, way before the actual breakout.

Basically a breakout in RSI indicates heavy buying power.

Now this indicates 2 things.

1. As a reversal trader, seeing the increased buying power, I would be very cautious if I were looking for reversal opportunities.

and

2. As a breakout trader, I would be prepared and on the lookout for a possible breakout.

Now you don't always need a breakout in the RSI to tell you there might be a breakout.

Another way to spot signs of oncoming breakout is by pure divergence,

Here the price is going down but the RSI is diverging up.

Now as a reversal trader I would be very cautious to not take a short trade in this scenario.

Whereas a breakout trader could view this as a sign of a possible breakout.

But again there was a gap up opening, and for intraday traders the opportunity is limited due to time constrain.

However divergence is not just limited to intraday trades, It works with any timeframe.

The only thing being is if you're a swing trader, you don't take a trade based on a divergence you spotted in 15 mins, you stick to the timeframe for a swing trade likewise for an intraday trader stick with your own timeframe.

and with that being said,
Hope you found this video useful. Many more trading & Investing videos here at Wealth Z Trader, Hit the Subscribe button to stay tuned!