Tag: trading indicators

Tag: trading indicators

Does the RSI Trading Strategy work? If yes, what is the win rate of the RSI Indicator? Well if you have been following the Trading Rush Channel for a while, you already know if the RSI Strategy works or not, that’s because we have tested it 100 times to find its win rate. But similar to the RSI indicator, there is a new and interesting indicator called the Connors RSI indicator. Does this Connors RSI indicator work? If yes, will it make you more money than the normal RSI trading strategy? In this video, I’m going to test the Connors RSI trading strategy 100 times to find it’s win rate. If you are watching the Trading Rush Channel for the first time, subscribe to the channel, because we test and have tested many different Trading Strategies 100 times to find their win rates. After all, you don’t want to risk your money on a Trading Strategy that doesn’t even work.

The original RSI indicator was developed by J. Welles Wilder, Connors RSI on the other hand is made by Larry Connors, but heavily relies on the work of J. Welles Wilder. On Trading View, this is how the Connors RSI indicator looks like. Unlike the RSI indicator, the Connors RSI has three components called the RSI, Up Down Length, and the Rate of Change. You can say that the Connors RSI is more of a tool, that is based on the RSI indicator. If it is a good thing or not, we will find that after we test it 100 times.

Just like the RSI indicator, the Connors RSI also ranges from 0 to 100, but in this indicator, the RSI line is called the CRSI line. Now the original RSI indicator came with the default over bought and over sold levels of 70 and 30 respectively. On Trading View, the Connors RSI also comes with the default levels of 70 and 30, but the creator of the Indicator Larry Connors, doesn’t recommend using those levels. Instead, Connors recommends using the 90 and 10 as the over bought and over sold levels. Furthermore, Conner also mentions that the higher the CRSI value goes above the 90 level, the higher is the chance of making a big profit. Similarly, the lower the CRSI value goes below 10, the higher is the probability of price making a big move in the entry direction.

Here’s how the Connors RSI Trading Strategy goes.

If you have watched other Trading strategy videos on the Trading Rush Channel, you know I always recommend using the 200 period moving average to find the long term trend. Well, guess what. Larry Connors also recommends using the 200 period moving average with the Connors RSI trading strategy. So in this video, we don’t have to modify the CRSI Trading Strategy at all, because it already uses the false signal filters just like we do on this channel.

So the buy signal, is when the price and the candle is completely above the 200 period moving average, and the CRSI is coming out of the over sold zone, which is 10 and below.

Similarly, the sell signal is when the price and the candle is completely below the 200 period moving average, and the CRSI is coming out of the over bought zone, which is 90 and above.

Now I have seen many people recommending not using a stoploss with this strategy. But if you have watched my video where I took 100 trades with stoploss and without stoploss, you know not using a stoploss is a very bad idea, especially if you are a new trader. If you haven’t watched that 100 trades Stoploss vs No Stoploss video, go watch now to see what can happen to your account balance if you don’t use a stoploss in trading.

Since the Connors RSI gives many signals in a shorter amount of time, while backtesting, In the long setup, I have set the stoploss slightly below the pullback. Similarly, in a short setup, I have set the stoploss slightly above the pullback.

With the default CRSI settings, I have tested the Connors RSI Trading Strategy 100 times, and here’s what happened.

Number 1. Unlike the original Relative strength index, the Connors Relative strength index gives a lot of entry signals. Since it already uses a 200 period moving average to filter false signals, some losing trades were avoided. The Connors RSI trading strategy was tested 100 times with the help of the Trading Rush App. You should test your Trading Strategy with the Official Trading Rush App as well. It saves a lot of time while backtesting a strategy because it calculates the profit graph, the win rate, and other useful data in just one click. Download it now from the Play Store or using the link in the description.

As you can see in the Trading Rush App, the profit graph goes up at the start because the entry signals given by the Connors RSI strategy were working. Price was reversing after reaching the over bought and over sold zones.

Number 2. While backtesting, the entry signals that were right, sometimes had a very high profit potential. If you are a trader that trails the stoploss to catch the big move, you can make a big profit when the Connors RSI gives a correct entry signal. But as you already know, trailing a stoploss requires a good amount of patience and emotional discipline. If you are a new trader, it is a good idea to stick to the fixed profit and stoploss orders to take advantage of the consistent profits.

Number 3. Since I have used the 1.5 to 1 reward risk ratio while testing other strategies 100 times, I have used the same reward to risk ratio here as well. But while backtesting, I noticed that the Connors RSI was giving entry signals that were too early. When the entry signal was right, the 1.5 times profit target was easily achieved because the stoploss was very small. But because of the way to early entry signals, the stoploss was easily hit most of the time. The Connors RSI trading strategy simply gives a lot of entry signals that are way to early than the actual price reversal.

So, after testing the Connors RSI trading strategy 100 times, I got the win rate of approximately 39 percent. Which is to be honest, is one of the worst win rate we have gotten in the strategies tested 100 times series. If you look at the profit graph in the Trading Rush App, you will notice that the profit line doesn’t appear to be going in one way like some of the other strategies we have seen on this channel. It looks more like the trades were taken randomly. For example, if we compare it with the Profit graph of the simple moving average crossover strategy, you can tell that the strategies like the SMA crossover gives way better and consistent profit than this. In the backtest, I lost 7 trades in a row, and won 4 in a row. The starting balance was 10000, and at one point the account balance was up by 850, but then everything came down as I took more trades. At the end, the account in the Trading Rush App was down by 250. The original RSI trading strategy that we tested 100 times, had way better win rate than this. So it is a good idea to stick with the regular RSI trading strategy, instead of risking your money on this thing.

That’s all. Now you know more about the Connors RSI trading strategy. Like the video if you liked it. Subscribe and ring that notification bell to see more trading strategies tested 100 times. After all, you don’t want to use a strategy that does not work at all. Download the Official Trading Rush App using the link in the description, and thanks to all the amazing Patrons who support the Trading Rush Channel on Patreon. You make these videos possible.

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2 BEST Forex Trading TIMES that can make you BIG PROFIT as a Day Trader

Post author By Trading Rush
Post date September 22, 2020

best time to trade forex

Tag: trading indicators

What is the best time to trade the forex market? Unlike stocks that are only open for trading for few hours, Forex market is open 24hrs a day, but not really. Forex market is open from 5 pm EST on Sunday to 5 pm EST on Friday, but not every trading hour in this time period are worth trading. There are times where Forex Market is more active, this is where you can get a very good reward to risk ratio, and there are times where Forex Markets are simply not worth trading.

Let me explain.

In Sydney Australia, the Forex market officially opens at 5 pm Eastern Standard Time and closes at 2 am EST. You can sometimes see some good price movements when this session opens, but most of the time, the price action is not that good compared to other sessions we are going to see.

In Tokyo Japan, session begins at 7 pm Eastern Standard Time and ends at 4 am EST. This is where Forex pairs like USD JPY and GBP JPY give a good price movement.

Then there is the London session that starts at 3 am Eastern Standard Time and ends at 12 pm EST, and is one of the preferred sessions by technical traders. London session is the most active forex session, and is also called the central trading capital of the world.

Just like the London session, the New York which opens at 8 am and closes at 5 pm, also gives some great opportunities for traders. In fact, it is the second largest platform in the world. In this session. you can find some really good trading opportunities on the Forex pairs that involve the US dollar.

But why am I talking about these Forex sessions? Why are they so important?

Well, you see, for price to make big move in your favor and to increase your profit potential in trading, the Institutional money has to be involved. When these session open, their respective banks also show interest. For example, in the London Session, the Britain’s central Bank has a heavy impact on the Forex Market.

Now one can say, that the best time to trade forex, is when the London session or the New York session is open because they have relatively good price movement. But if you look at the opening and closing timings of these sessions, you will notice that there is a overlap. There are few hours where both London and New York sessions are open. Since both of these sessions have a high trading interest, you can say that the overlap of these sessions is the best time to trade.

Lets see an example. On this chart, you can see how the market is in a range and the volume is low in the Japan and Sydney Sessions. But when the London session starts, you can spot the increase in volume. Even the price movement is a lot better than the previous session. When the New York session opens, you can see the volume rising even more. During the overlap of the London and New York sessions, you can see how price made a very big move. And if you compare this movement with the Asian Session movement, you can easily tell that the price action during the overlap is much better, and give some of the best trading opportunities.

But how can you actually use this information to enter trades? Obviously, not everyone is going to find the London and US overlap time suitable for trading, because everyone most likely lives in different corner of the world. If you can’t trade during the US and London overlap, which is from 8 am Eastern Standard Time to 12 pm EST, you can trade in the Sydney and Tokyo overlap hours. Most of the time this period is not that volatile compared to US and London, but it still gives some decent trading opportunities. The worst overlap among the 3, is the London and Tokyo overlap. You will rarely see a high volume price action in this period, and because this overlap is only 1 hour long, many traders will not participate.

But if you can participate during the US and London overlap hours, make sure you look out for any upcoming news. Price can make a huge sudden move in one direction when there is a big news release. Since price action gets volatile during the overlap hours and in the London session, you should probably plan your stoploss ahead of time. When the price starts making sudden moves, you don’t want your stoploss to be taken out. If you set your stoploss by taking the price volatility into consideration, when a new session starts, don’t make the mistake of setting your stoploss using the volatility of the previous session. It is good idea to wait and analyze the movement of the new session. For example, if you set your stoploss considering the volatility at the end of the Asian session, there is high chance your stoploss will be taken out if the volatility rises in the London session. If you don’t know how to use the price volatility to set your stoploss, you can use the ATR indicator. I have already made a video about it, check it out to know more about the ATR stoploss and how it can be better.

Some say news trading can also be very profitable in forex, but in reality, predicting the price direction before a news release is a difficult task to do, and new traders should probably avoid it, but not completely. For example, if there is a big news that has the potential to increase the volatility, you should wait for the first few sudden moves, and take advantage of the high volume price action that will follow for a while. Unemployment rates, Central Bank meetings, and interest rates are few examples of news events that can give a decent trading opportunities.

Overall, the best time to trade the Forex market and to find some of the best trading opportunities, is during the overlap of the London and New York sessions. If you can’t take trades during the overlap, the London session can be the next best one, followed by the New York session. If possible, you should aim to take most of your trades during the overlap of the forex sessions, and when the price is more volatile. Otherwise the price will stay flat and you will be stuck in a trade for a long period of time.

You should also be careful while trading in the New York session, as there can be a late news release from the previous sessions. These unexpected price movement can turn your profit into a loss. Furthermore, it is a good idea to avoid taking trades at the very start and at the very end of a forex session, that’s because traders from the previous session could be exiting the trades, this can sometime lead to a noisy price action at the start of the next session.

You can even trade in session overlap hours only, this way you will only take trades when there is a movement in the market, and trading only for few hours will also avoid you from over trading, which in other words, will avoid you from blowing up your account.

And If you find it confusing to convert your local time to find the timing of the Overlap sessions, you can change the time zone on your charting platform to use the New York time, or the Eastern Standard Time. All the Forex market hours mentioned in this video were in Eastern Standard time as well.

So that’s all. Now you know a bit more about trading. Like the video if you liked it. Subscribe and ring that notification bell for more trading videos. Check out other trading strategy videos on the Trading Rush channel. And if you find this video helpful, you will find the 5 steps trading strategy video helpful as well. In that video, I show how you can filter bad forex pairs, and take trades on quality setups using 5 proper steps. Thanks a lot for watching.

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100 Trades WITH Stoploss vs WITHOUT Stoploss vs NO Profit vs NOTHING to find the best for Trading…

Post author By Trading Rush
Post date September 10, 2020

100 forex and stock market trades stoploss vs no stoploss

Tag: trading indicators

If you don’t set a stoploss in trading, how much money can you actually make or lose? Surely you have heard almost everyone recommend using a stoploss while trading in forex and stock market, but how bad can a trade really get if you don’t use a stoploss? Well, to find out, I took 100 live trades on different forex pairs and let them ran for 24 hours straight. These 100 trades were divided into 4 types. 25 with stoploss and profit target, 25 without any stoploss but with a profit target, 25 with stoploss but no profit target, and 25 trades with nothing.

So, which kind of trade do you think made most money?

The trades with no stoplosses should make the most money right? as only thing they can achieve is the profit? Well, you are not half wrong, because the first trade I took on the Euro USD pair with a stoploss, was lost. But same trade without the stoploss was in profit. Remember, I took all trades in the direction of the long term trend. I used the 200 period moving average to find the long term trend and took 4 different types of trades at the same time on a single pair and on the 3 minutes time frame. Stoploss was set at a good enough distance from the entry by using the trading views position tool, and in this paper trading example, I’m using a 10000 dollars account, and only risking 1 percent of that account per trade.

So the first trade with the stoploss and profit order was lost, and the trade with no stoploss was won. It made a profit, but at one point, the no stoploss trade was down almost 200 dollars, which is two times more drawdown than the last trade. Nevertheless, after 24 hrs, the trade was in profit. The trade with no profit order on the other hand, had made a loss. Looks like the trades with no stoploss orders were making money, because the last type of trade with no profit and no stoploss order, was up by almost 1350 dollars at one point.

Now obviously, not everyone is going to exit at the maximum profit. In reality, not everyone is going to stay in a trade till the exact time of the reversal. But just for this experiment, lets assume that there was a genius 400 IQ trader, Bill the first, who was able to exit at the max profit. Even though Bill the first is happy, because he made money where other traders didn’t by using a stoploss, do you really think he can handle the max draw down in the up coming trades?

The first few trades that had no stoploss and profit targets, were really lucky for bill the first. The trades that were lost by using stoploss orders, were actually profitable and made more than 2000 dollars. Now remember, the maximum profit potential for a normal 1.5 to 1 reward risk ratio trade, is 150 dollars. So it appears that the trades with no profit or stoploss orders were actually making a lot more profit, at least for now. Bill is probably bursting with happiness. On GBP USD pair, the trades with a fixed profit targets made 150 dollars, whereas the trades with no profit targets, had a profit potential of 2100 dollars, which is 14 times more than the max potential of fixed profit orders trades.

But don’t be fooled by looking at these good profit numbers yet, and don’t let your mind change about the usefulness of the stoploss orders. Because after looking at the rest of the results, you will not wish to be a trader like Bill.

If we look at all the trades that had stoploss and profit orders, you will notice that highest loss potential these trades had, was only 100 dollars. 100 dollars in this example, is only 1 percent of the entire 10000 dollars account.

But if you look at the results of the trades with profit target but no stoploss, you will notice that the maximum profit potential is same as the previous type of trade, but not everything is same. Here, the maximum loss potential was more than the potential profit. and even though almost all trades were winners, the total profit the winning trades made, was not very high compared to the losing trades. 24 out of 25 trades were in profit, but because one losing trade made a loss of 3440 dollars, the total loss skyrocketed. 3440 dollars loss is around 34 percent of the total account balance. If you think 34 percent is very high for a potential loss, you will be shocked after looking at the rest of the results.

The trades with stoploss but no profit target had the highest profit. Since the max loss per trade was capped at only 100$, the trade with stoploss but no profit target, was most effective among the last three types. This kind of trade is very similar to a trailing stoploss trade. In a trailing stoploss trade, you trail the price as long as possible to catch a bigger profit. I did similar thing in my live VWAP trading videos. Instead of setting a profit order, I was simply trailing the price as it went in my favor.

This kind of trading style can be a lot profitable if you know what you are doing. It was profitable in this case. But if you are absolutely new to trading, you should probably stick to the fixed profit and stoploss orders. That’s because you don’t want to continuously look at your running trades as a new trader, otherwise there is a chance that you will end up booking a small profit after thinking with your emotions. In this case, the strategies with fixed reward to risk ratios didn’t make the highest profit, but they are very much profitable with a good trading strategy, as we have seen in the strategies tested 100 times series on this channel. Check them out if you are new.

As we saw earlier, the trades that had no profit and stoploss, were looking very profitable at the start. And in the first half, they were the most profitable kind of trades than the rest. They were easily crossing maximum potential that was 20 times higher than the fixed profit trades. But then, there was this one trade.

At one point, when all other trades were in profit. The trade with no profit and stoploss targets, had a max potential loss of 22800 dollars, in just 24 hrs. 22800 loss is 228 times more than the normal fixed stoploss trades, and 22800 is 228 percent of 10000 dollars. 10000 dollars was the total account size in this paper trading example, so basically, Bill the first, just blew up his account.

In this example, the trades with no profit or loss orders, had the highest amount of profit potential, but also had the highest amount of potential loss. and because of that, the trades with nothing, gave the worst performance in this example.

Now, if you look at the data carefully, you will notice that the same trade with profit target but no stoploss, didn’t made the same loss, because it had reached its profit target first. But if it had not touched it first, and if price had reversed immediately after taking the trade, this trade would have also blown up the account.

So the conclusion of this experiment is something that you have heard many people say, use a stoploss if you don’t want to end up like bill the first with negative balance in the account.

The point of this video was to demonstrate and show the beginner traders, what trading without a stoploss looks like. I hope this gave you a perspective.

Like the video if you liked it. Subscribe and ring that notification bell for more trading videos. And if you want to learn about setting a proper stoploss, or if you want to see the real win rates of trading strategies that we have tested 100 times, check out other videos on this channel, or in the Trading Rush App. Thanks a lot for watching.

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4 USEFUL Trading Breakout Tips that can Make You MONEY in TRADING

Post author By Trading Rush
Post date September 6, 2020

4 breakout strategies trading rush

Tag: trading indicators

If you find yourself in a position, where you enter a trade, but it immediately goes in the opposite direction, before finally going in your favor? Well, then this video will make you better at trading. Lets look at a theory. Lets say, you saw some strong support and resistance areas and you are waiting for the price to break those levels. You put your money in a position when the price gives a break out. The price is breaking out of a resistance level, but instead of moving further in your direction, it turns around as soon as you enter the trade and hits your stoploss.

To understand why price goes against you after a breakout, we will first have to understand what actually happens inside a range breakout. Since price ranges after a trend, let’s assume that some traders took long positions in an uptrend. After a while, the price gave a pullback near a support level after touching a resistance area, but then struggled to make a higher high. After getting buying and selling pressure at the support and resistance levels, the price simply moves sideways. Any beginner trader can tell, that this is a range market, and price will make a big move after it breaks these support and resistance levels.

But here’s the thing. Some traders who bought when the price was trending, or traders who bought at this pullback, will still have an open position. In a range market, price can either break up, or break down. In this example, since price hasn’t given any signs of reversal, traders who are holding a long position, will set a stoploss just below the breakout support.

Then there are second kind of traders. These traders are willing to sell at a resistance level, hence the selling pressure that is stopping the price to go higher. The traders who are selling at this resistance level, will most likely set their stoplosses, just above the resistance level.

Now here’s a big problem. In these kinds of scenarios, the stoploss of a retail trader becomes obvious and vulnerable. In a breakout, the people who are selling at resistance, are setting their stoploss just above the resistance. And the people who are buying at the support, are setting their stoploss just below the support level.

Now lets say, there is bill. Bill, is the big banks. Bill is the one who trades in very large quantities. Bill the big banks, sees the breakout opportunity. He sees that there are many stoploss orders waiting to be triggered. Now remember, big banks actually trade in very high quantities than the retail traders. So when an institutional trader enters with a very big position, the price makes a big move, especially on smaller timeframes.

In this scenario, when the price comes near the support. Bill the big banks, creates a selling pressure that leads to a small downward move. But since there were a lot of retail traders waiting for a breakout, 2 things happen. Number 1, the people who had their stoploss orders just below the support level are taken out. Since a stoploss order in a long position, is a sell order, more selling pressure is created at a breakout.

Number 2, the people who wanted to sell at the breakout, finally sell, and create even more selling pressure. These traders will set their stoploss just above the breakout level. The selling pressure leads to a big red candle.

Now, what do you think will happen, if the big banks creates a buying pressure as soon as the breakout happens? When this happens, the traders who entered after the breakout candle, are taken out because they had a stoploss, just above the breakout level. Since stoploss order of a short position is a buy order, a new buying pressure is created. And if the top resistance is crossed, even more buying pressure is created as the traders, who had a stoploss above the resistance, are taken out, and new orders are created at the new high. The retail traders who had open orders below the support levels, basically got played.

Beginner traders who get to experience this part of the market, sometimes complain that their broker can see their open orders, and is trading against them. No, that’s not really the case. Your orders are simply too predictable.

So how can you avoid this from happening? Well, the easiest and effective way of trading a breakout, without getting played, is to wait for the price to react in your favor.

There is a chance that price will reverse after a breakout, but we cannot know that as a retail trader. If a breakout is going to work, In a downward breakout, the level that is broken will now act as a resistance level. So, it is better to take the short position, when the price comes back to this resistance area, and struggles to go higher. Then you can look for an entry signal, like a engulfing candlestick pattern.

Now some traders will say, why not just put stoploss orders far away from the obvious support and resistance levels? Well, if you do that, you will not get a decent reward to risk ratio.

What about trend breakouts? If a down trend that was respecting the trend line resistance, suddenly breaks out, will the price reverse? No, unless the down trend was a weak pullback of an uptrend, or if it is at a strong support level, a simple trend line breakout will have a low chance of reversing the price direction completely. You see, when the price breaks the trend line support or resistance, it doesn’t always has to mean that price will take a 180 degree turn. It can simply mean that the trend is getting weaker, and can go side ways.

Now imagine a second scenario. What do you think will happen, when price breaks out of an all time high resistance level, and makes a new high for the first time in its history? It will be on the news. Many people who have never traded in their entire life, will take long positions in that asset. But what if price doesn’t go further up? What do you think will happen then? Well, first of all. The people who took trades only looking at the news, will panic. When the price comes back below the previously broken resistance level, many will cut their losses. This will create a huge selling pressure. and since this is a panic sell, you can capture a good profit when the price makes a big move down.

A lot of beginner traders are told to trade the trend breakouts, without completely explaining what kinds of breakouts are better. The trend breakouts that have a higher chance of working, are probably the pullback trend breakouts. In a strong uptrend, if the price gives a small pullback, you can trade the break out of that pullback. This way, you will take trade in the direction of the long term trend, which will increase your chances of making a profit.

Now lets imagine another scenario. This time, when the range is formed after an uptrend, there is no Bill the big banks, or any bank to take trades against you.

Let’s say, someone draws the support and resistance levels, at the tails and body of the candles.

When they take positions at the breakout, the price goes in the opposite direction again. But this time, it’s because the beginner trader is too much focused on their favorite timeframe. You have to understand that not everyone is looking at the exact chart as you are. The support and resistance you draw using tails and bodies of the candles, won’t always work, because they will look very different on different timeframes.

If you are waiting for a breakout to happen, make sure the support and resistance you are looking at, can be easily identified on other timeframes. Furthermore, when the breakout happens, make sure it is visible on different timeframes as well. Because sometimes, a successful breakout on one timeframe, can mean something else on other timeframes. This can lead to a lack of high volume and interest near the breakout area.

After understanding these kinds of scenarios, you will be able to tell when a possible trap is set, and with patience and good money management, you will probably make money with the breakouts.

That’s all. Now you know a little more about breakouts in trading. Like the video if you liked it. Subscribe for more trading videos, and check out other videos on the Trading Rush channel, where we tested many different trading strategies 100 times to find their real win rates. Thank you very much for watching.

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Top 5 BEST Trading Strategies that work with PROOF

Post author By Trading Rush
Post date September 1, 2020

top 5 best trading strategies forex stock maket trading rush indicator

Tag: trading indicators

After testing many different trading strategies 100 times on the Trading Rush Channel, I think we have enough data to make a top 5 list of trading strategies that work.

So I hope this list will help out the stock and forex traders, who are just starting out, and have no idea about what strategies make money. If you are watching this channel for the first time, subscribe to the channel, also check out other videos on the Trading Rush channel, where we tested many indicators 100 times to find their real win rate. After all, you don’t want to risk your money on a strategy that doesn’t even work.

One of the simplest and popular trading strategy, is the moving average crossover strategy. I recently tested this strategy 100 times, and it was able to make money in the long run. It didn’t had a very good win rate like other strategies on this list. It had a win rate of more than 45 percent, even with a reward to risk ratio of 1.5 to 1. Don’t take my word for it. You can watch the entire backtesting clip, and see how this strategy performed yourself. You can find the backtesting videos on the Trading Rush channel, and on the Trading Rush Website. There are two versions of this crossover strategy. One is the Exponential moving average crossover strategy, where an exponential moving average is used. And other one is the SMA crossover strategy, where the Simple Moving Average is used. These crossover strategies are usually for swing trading. But I used it as a trend following strategy, because as a new trader, you should probably follow the trend, since that’s where most money is made. I won’t go into detail on how this strategy works. I have already made dedicated videos on this topic. You can find them on this channel.

The fourth strategy in this list, that performed better than I expected, is the alligator trading strategy.

This is also a trend following strategy, but performed slightly better than the moving average crossover strategy. When i tested the alligator strategy with a reward to risk ratio of 1.5 to 1, it had a win rate of approximately 50 percent. One of the best part about the alligator indicator i found after testing it, was its ability to detect if the price is in a range or not. Since many beginner traders lose money when market is moving sideways, this strategy takes the 4th spot on this list. Now, if you want to learn about the alligator indicator, you can watch the alligator video on this channel. But if you want to see the backtesting clip for the proof, you will have to watch it in the Trading Rush App, or on the Trading Rush Website. That’s because the video was removed from YouTube due to some policies.

On Number 3, it’s the strategy that had the second highest win rate. It’s the bollinger bands strategy. It had a win rate of approximately 55 percent. Now remember, 55 percent win rate is a really good win rate, for a strategy with a reward to risk ratio of higher than 1. If we would have used a 1 to 1 ratio, the win rate could have been much higher than this. But then we would have not made more profit per trade than the risk. I did modify the basic bollinger bands strategy to filter false signals, and because of that, the bollinger bands strategy did make money in the back test.

On number 2, it’s not a strategy that performed better than the bollinger bands, but it has so many perks, that it easily takes the second spot on this list. It’s the Ichimoku Cloud trading strategy. At first glance, the Ichimoku Cloud can look like a mess, that can scare away new traders. But if you take time to clearly understand this indicator, you will get better at trading. Because this indicator, not only gives the entry signals, but also shows you where to set the stop loss, tells you when to avoid trading, and it even shows the direction of the trend. If you try to master this indicator early on, you won’t have to spend time on learning more about stoploss and other indicators, since this is a complete package. I have already made a detailed video on it. Watch it if you want to learn more.

Before we move on to the best strategy we have tested so far, here are some honorable mentions. These are some trading tools that are very useful in trading forex and stock market. The first tool I would recommend is the ATR indicator. If you find it difficult to set the stoploss, the ATR indicator is for you. It takes price volatility into consideration, and shows you where to set your stoploss. By setting the stoploss using the ATR indicator, price will have less chance of hitting your stoploss, before going towards your profit target. Another similar indicator, is the Parabolic sar indicator. There is also an entry signal strategy around it, and I have tested it 100 times as well. But Parabolic sar works great, as a stoploss indicator. You can even use it as a trailing stoploss indicator, if you want to trail the price.

Another indicator that can be really useful, is the VWAP indicator. This indicator only works for stocks. I know you guys want me to test this indicator 100 times, but I can’t, or at least I don’t know how to. That’s because the VWAP indicator is a tool, that shows the Volume Weighted Average price. It shows where institutional buyers are most likely to take trades. VWAP is my personal favorite indicator for stock trading, and I have made a video on how to use it. Furthermore, I have also made live trading videos with it. But in those videos, I don’t take trades based on VWAP alone. I take trades that are at or near the VWAP line, when some kind of candlestick pattern is giving an entry signal. So why don’t I test the VWAP indicator 100 times with the candlestick patterns? Well, you see, the price doesn’t exactly reverse at the VWAP. It can reverse a little bit above or below the VWAP line, due to the increase in interest of buyers and sellers near the VWAP line. Because of this, the backtest will become very biased, which will result in a wrong win rate. In the strategies I test and have tested so far, the entry signals I took were unbiased, because they were taken by looking at the indicators. For example, a crossover of the moving average. Since indicators take past price data to calculate their values, the entry signals will look exactly the same, as they will look in a live market.

Now, the best strategy, that also helped me double the forex account in the small account challenge series. Is the MACD strategy. This strategy had the highest win rate in the strategies tested 100 times series. The strategy is simple and effective. A beginner trader can easily pick it up, and with a proper money management, can probably start making money in trading. Money management is more important than this strategy. The MACD strategy, had a win rate that was more than 60 percent. 60 percent win rate for a trading strategy with reward to risk ratio of 1.5 to 1, is really good. Like other trading strategies on this list, the MACD setup is also a trend following setup. But unlike other indicators, the MACD does not give a lot of entry signals that frequently. But When it does, the probability of the trade going in your favor is really high. And that’s good. Since MACD doesn’t give entry signals frequently, beginner traders won’t over trade, and blow up their accounts, as long as they have proper money management in place. MACD strategy video was the first video on this channel. If you want to learn more about the MACD strategy, or want to see the full backtesting clip as a proof, check out the first video on this channel.

If some strategies or backtesting clips are not available on this YouTube channel, there are probably available in the official Trading Rush App, or on the Trading Rush Website.

That’s all. I will update this top 5 list, when I find more profitable trading strategies, after testing them 100 times. So, if you want to see other trading indicators, tested 100 times to find their real win rate, subscribe to the Trading Rush channel. And don’t forget to ring that notification bell, so you don’t miss any new videos. Thanks to everyone for watching.

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AROON Trading – Best Money Indicator for Trend Traders Tested 100 times

Post author By Trading Rush
Post date August 22, 2020

aroon trading indicator

Tag: trading indicators

If you are struggling to find the strength of a trend, or can’t figure out if the price is in a range or not, the Aroon indicator is right for you. Trend is where most money is made. So Aroon indicator can be very useful to determine whether a stock or Forex pair is trending or is in a range. When Tushar Chande created this indicator in 1995, it was mostly used to find the beginning of a new trend. Since then, traders have learnt to use it in different ways, and have created many different strategies around it. In this video, you will learn about the aroon indicator, how to use it to find more about a trend. Furthermore, I have also tested one of the aroon trading strategy one hundred times, to find if the Indicator works as an entry signal generator or not.

So if you want to know if the aroon strategy is a profitable strategy, stick around, after all you don’t want to risk your money on an indicator that doesn’t even work. And if you are watching the Trading Rush channel for the first time, also check out other videos on this channel, where we tested bunch of other indicators 100 times to find their real win rates.

This is how the aroon indicator looks like. On trading View, this indicator will come with the default length of 14. If it is different for you on your charting platform, just remember I have tested this indicator 100 times with these default settings.

As you can see, the aroon indicator will come with 2 lines. One will be the aroon up line. And other one will be the aroon down line. Now, on trading View, these lines are orange and blue in color. So to keep things less confusing, I have, and you should probably change it to green and red color respectively.

On the right hand side of this indicator, you will see some values ranging from 0 to 100 percent. These are the values that we are going to use to find the strength of a trend.

Here’s how most traders use the Aroon indicator. It’s a bullish trend, when the aroon up is above 70, and aroon down is below 30. Similarly, it’s a bearish trend, when aroon down is above 70, and aroon up is below 30.

Now one thing to note here is, the bullish and bearish signals are generated by looking at the aroon line that is at the top. Some beginner traders get confused, and take short trades when aroon down line is at the bottom. The bearish trend signal is only generated when the aroon down line is above the 70 percent level.

Now one of the best part about the aroon indicator, is that it helps to identify the range market. Most new traders lose money in a range market, so indicators like these really come in handy.

When the aroon up and aroon down lines are parallel to each other, the market is said to be in a range. It means that there is no trend going on. And if you are a new trader, you should probably avoid taking new positions. Other ways to identify the strength of a trend, is to look at the two aroon lines. If aroon lines are far away from each other, there is a strong trend going on. And if they are very close to each other, the price is probably consolidating at the moment.

Now like I said, the Aroon indicator is really good when it comes to identifying the trending and ranging market, especially for a beginner. But just like other indicators, people have found new ways to use this indicator, as an entry signal generator.

In this video, I have tested this 100 times, using one of the popular aroon trading strategy. Here’s how the strategy goes.

The buy entry signal is generated, when the aroon up is touching the 100 percent mark, and aroon down is at 0 percent. Similarly, the sell signal is generated, when the aroon down is at 100, and aroon up is touching the 0 percent mark.

Some people also use 70 and 30 levels to buy and sell, but those levels generate a lot of false signals. So i have used 100 and 0 levels to backtest, instead of 70 and 30.

But if you have been watching the Trading Rush channel for a while, you can tell, that this setup on its own can’t make money, because there is no way to identify the direction of the long term trend. If you trade on a smaller timeframe, you should always pay attention to the trend direction of the higher timeframe. Otherwise you will take trades in the opposite direction of the long term trend.

The easiest way to identify the long term trend direction, is to use the 200 period moving average. If price is above it. It’s an up trend. If price is below it, it’s a down trend.

So here’s how the complete modified aroon strategy goes.

We will only buy, when the aroon up is at 100, and aroon down is at 0, and the signal is generated when the price is above the 200 period moving average.

And we will only sell, when the aroon down is at 100, and aroon up is at 0, and price is below the 200 period moving average.

Since aroon indicator doesn’t give information about setting the stoploss, I have used the parabolic sar indicator to set the stoploss while testing the aroon indicator 100 times. Parabolic sar is an excellent indicator. If you have never heard about it, check out the parabolic sar video on the Trading Rush channel. And i have also tested that indicator 100 times to find its real win rate. You can find that video on the Official Trading Rush Website.

So, I tested aroon trading strategy one hundred times, here’s what happened. You can slow the backtesting clip, if you want to see each trade carefully.
I’m using the official trading rush app for backtesting. You can use it while testing your strategy as well. It will help you keep track of your trades, and will calculate everything in just one click. You can find it on the Play Store, or you can use the link in the description.

While the backtesting clip is running, here are some important points, advantages and disadvantages I found about the aroon indicator, while testing it 100 times.

Number 1. When the aroon lines were separated and were far away from each other, the trend that was going on was strong. Most of the time, there was no consolidation when the aroon indicator was indicating a trend. When price was in a range, the aroon lines were not on the opposite end of the Indicator. They were intersecting multiple times in a short time period. What this means is, the aroon indicator works great if you only use it to determine the strength of a trend, and to find if the market is ranging or not.

Number 2. The aroon indicator, worked great as an entry signal generator. Some trades I found were at a start of a new trend, or right at the correct end of a pull back. But there is one problem with aroon indicator that kept turning the profit into a loss.

Number 3. The biggest drawback of this Aroon Setup, is that the aroon indicator doesn’t know when the trend is coming to an end, or is stretched out too much. And it’s okay, because aroon is made to find the start of a new trend, and not the end. Most of the trades I lost while testing it 100 times, where at the end of the trend, where there were other signals of reversals. This could be easily avoided. To avoid taking trades at the end of a trend, you can use other indicators that do that job perfectly. I have made videos on these types of indicators on this Trading Rush channel. Check it out if you want. The best part about the MACD indicator video was one of them.

So, after testing the aroon indicator as an entry signal generator, here’s what I found.

The win rate of aroon indicator is approximately 40 percent. Since I tested other indicators with 1.5 to 1 reward risk ratio, on 30 mins, and on Euro JPY pair, I have used the same criteria to test this Indicator as well. There were many other indicator that performed way better, than what the aroon indicator performed here.

This strategy is a hit or miss strategy. In this backtest, the Aroon indicator didn’t lose money, but didn’t make money either. The maximum number of winners I got in a row were 4, and maximum number of losses in a row were 9. At one point, this strategy did make 1350 dollars. But then everything went downhill, and the 1350 disappeared as i took more trades.

If you are thinking about trading using the Aroon indicator, remember, Aroon is good when it comes to identifying the strength of a trend, or to determine of the market is in a range or not. When it comes to taking trades only based on entry signals given by the aroon indicator, you are better off with some other indicator.

I have tested many other indicators 100 times of this channel, some of them had excellent win rates. If you want, you can watch them in the Trading Rush App, or on the Trading Rush Website, and some of them are still here on this Trading Rush channel.

That’s all. Like the video if you liked it. Subscribe if you want to see more trading strategies tested multiple times to find their real win rate. Thanks to all the wonderful people who support Trading Rush on Patreon, you make these videos possible, and I really appreciate it. And thanks to everyone for watching.

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VOLUME Trading to find the BIG and Smart Traders

Post author By Trading Rush
Post date August 15, 2020

volume trading strategy trading rush

Tag: trading indicators

In my VWAP video, i talked about how and why institutional brokers trade at the VWAP line. And how you can use that information to trade when the big players are trading. Volume on a trading chart is pretty useless on its own. But if you connect the volume with the price data, you will find some of the key levels on a trading chart and can spot where the big players are trading. Individual traders with their small number of shares, can’t make a huge difference on a stock or Forex pair, but if you buy and sell where the big and smart traders are trading, you will make more profit, because price tends to make a big move when the institutional buyers enter the market.

But Before we learn how to find where the big money is at, we will first have to understand how the volume actually works.

Lets say, bill buys 200 shares at 10 dollars, and bill the second sells 200 shares at 10 dollars. Since bill bought 200 shares and bill the second sold 200 shares at 10 dollars, the volume traded at 10 dollars is 200. It is not 400. A lot of new traders think that the volume is 400, since 200 plus 200 equals 400.

Purchasing few shares of a stock is very similar to purchasing few pencils from a shop. And it is very similar to the math guy from the textbooks. When the math guy pays 200 dollars to buy 200 watermelons, the sellers gives him 200 watermelons. The volume traded here is 200, since the seller sold 200 watermelons, and the buyer bought 200 watermelons at 200 dollars.

Like i said before, this kinda of volume data on its own is pretty useless on a chart, unless you also take price data into consideration.

Here’s how to use the volume and price data together on a trading chart.

Number 1. When the price increases, and the volume also increases, the price is considered to be bullish.

Number 2. When the price increases, but the volume decreases, the price is considered to be bullish, but only the small traders are buying. Big players with their large amount of shares are not buying.

Number 3. When the price decreases, but the volume increases, the price is considered to be bearish.

Number 4. But when the price is decreasing and the volume is also decreasing, the price is considered to be in a downtrend, but only the small traders are selling. Big players are not participating in that move.

Now by increasing and decreasing volume, I’m not only talking about the volumes of individual candles, but also the volumes of all the neighboring candles.

A lot of new traders, will only look at the volume of the candle that they are taking the trade on, and not the volumes of other nearby candles.

Sometimes, beginner traders are told that they should pay attention to the volume when the enter trades. If you enter on a candle and its volume rises, it is a good sign, as there might be other traders entering at the same time. And if the volume does not rises, your trade entry might be wrong.

This statement is kind of misleading. When you enter trade on a candlestick pattern, there is no rule that the institutional buyers and other traders will or should take positions by looking at the same candle. So the chances of volume rising at the same time you take the position is highly unlikely. If many traders are interested in buying at the same area as you are, you will see increase in volume near your entry area, and not on your entry candle only.

Since institutional buyers trade in very high quantities, price tends to make sudden big moves, when the big players enter the market. On smaller time frames, these sudden movements can easily take out your stop loss. But if you spot the increase in volume at the right time, you should take this opportunity by taking a position. If you get lucky, you will ride the whale.

One of the situations where finding higher volume is really helpful, is during the formation of the engulfing candlestick patterns.

A bullish engulfing pattern is a candlestick pattern that forms when the smaller than average red candle is followed by a large green candle. This green candle is so big that it covers or engulfs the entire body of the previous candle. Bullish engulfing pattern indicates a possibility of price moving higher.
A bearish engulfing pattern is just opposite of the bullish engulfing pattern.

Not all engulfing patterns are worth trading. To filter out false engulfing signals, you should take a look at the volume.

Let me give you an example.

Lets say, you are waiting for the price to reach a support level. To make sure the support has a high chance of working, you look at the volume.

As the price is coming down to your support area, you see the volume decreasing. When it touches your support area, a bullish engulfing pattern is formed. An Engulfing pattern is a good sign as it indicates a reversal. But this one is even better, because this bullish engulfing pattern has higher than average volume on the green candle.

This means that there is high buying demand near the support area you drew. After this engulfing pattern, there is a high chance that the price will move higher.

In this example, you saw the decreasing volume near the support area. But what if it had kept increasing even after touching your area?

If you saw the price moving down towards your support with higher volume. It indicates a bearish pressure. In simple words, there is still a demand for selling near your support area. If this is the case, the probability of your support area working and price reversing are very low.

Volume can also help you identify the false breakouts. If price is in a range for a while with a low volume, and you see a breakout with an average volume, it indicates a possibility of it being a false breakout. But if a candle breaks out of a range with higher than average volume, the chances of price moving further in the breakout direction becomes higher.

If you are trading using the volume, here are some important points you should note.

Number 1. Volume can be used to analyse the market trend, and reversals and your support and resistance levels. Further more, volume can also be used to make sure the pullbacks in a trend, are actual pullback and not reversals.

In an uptrend, if price is moving higher, and gives a pullback with lower volume, it’s a sign that price can still move upwards. But if the pullback has higher than average volume, it can indicate a start of a new downtrend.

Number 2. Volume can also be used to find the smart money and the dumb money. If price increases and volume increases, it a bullish trend. If price increases, but volume decreases. It’s a bullish trend, but there is no smart money participating. If price is decreasing, but the volume is increasing, it’s a bearish trend. If the price is decreasing, but the volume is also decreasing, its a bearish trend with dumb money. Big players are not participating in this move.

Number 3. Avoid trading on low volume days and take trades on higher volume days.

Number 4. Volume can be a lot higher and price movement can be more volatile on stocks during events or news releases. If you trade on smaller time frames, you should keep an eye on these news releases that impact the volatility.

Number 5. Volume is usually higher during market openings and closing, and is low during lunch hours. If you are a beginner, you should probably avoid trading during lunch hours and only trade when the market is trending with a high volume.

That’s all. Now you know a little bit more about volume in trading.

Subscribe for more videos. Like the video if you like it. Download the Trading Rush app, or checkout the Trading Rush Website for more trading videos. Thanks to all the Patrons who support trading rush on Patreon, and thanks to everyone for watching.

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Supertrend Indicator Tested 100 Times so you don’t have to…

Post author By Trading Rush
Post date August 11, 2020

supertrend indicator trading strategy trading rush

Tag: trading indicators

Well, I tested supertrend indicator 100 times, and the results I found were pretty interesting. In this video, you will learn about the supertrend trading strategy, it’s real win rate, and some disadvantages I found after testing it 100 times. But first of all, if you haven’t watched my ATR indicator video, maybe considered watching it before this video, since Supertrend indicator relies on the ATR values to calculate its values. And maybe checkout other videos where i tested other trading indicators 100 times to find their real winrates. You can watch them on the official Trading Rush Website.

If you are new to trading, and have never heard of this indicator before, here’s how the popular Super Trend Indicator looks like. Now, on some trading platforms, super trend indicator can look a little bit different. But the basic indicator will look something like this.

A simple line that changes its color now and then. These colors are usually red and green.

The supertrend indicator is very similar to a moving average. and just like a moving average plotted on a chart, supertrend indicator will also give crossovers time to time.

When the Supertrend line is below the price, the color of the indicator will turn green. Similarly, When the Supertrend indicator is above the price, the color of the indicator will turn red.

But what do these changing colors mean? Well, as the name of the indicator suggests, the Supertrend indicator is trying to show the current Price Trend. It is trying to show the direction of the trend. When the supertrend indicator is green in color, and is below the price, the price is considered to be in an uptrend.

Similarly, if the supertrend indicator is above the price, and is red in color, there is a downtrend going on.

Now to keep it simple, that’s all supertrend really is. An indicator to find the direction of the trend. But people have figured out a way to use it as an entry signal generator. That’s right. The simple supertrend entry strategy goes something like this.

You buy, when the supertrend indicator flips below the price, and the color of the indicator changes to green. Set your stoploss, at or below the supertrend indicator.

And you sell, when the supertrend indicator flips above the price, and the color of the supertrend changes to red. Set the stoploss, at or above the supertrend line.

Now once you have entered the trade, how can you exit using the same indicator? Well, if you are not the trader that uses a fixed stop loss and profit target, you can use the supertrend line to trail your stop loss.

When the supertrend indicator turns green and flips below the price, you can enter the long trade, and trail the stoploss just below the supertrend line. The line will eventually flip over the price, and then you can completely close your long position.

If you have entered a short position when the supertrend flipped to red color, you can trail your stop loss using the supertrend line.

Now if you have been trading for a while, you know we can’t take every trade at every entry signal given by the supertrend indicator. Using the indicator just to find the trend direction is fine, but using it as a entry signal generator on its own can be bad idea.

If you take every entry signal given by the supertrend, you will end up taking short positions in a strong long term uptrend, and long positions in a strong long term down trend.

So to filter out the false signals given by the supertrend indicator, we will use the 200 period exponential moving average.

200 period moving average is widely used to find the direction of the long term trend. If the price is above it, there is an uptrend going on, and if the price is below it, there is a downtrend going on.

So here’s how the modified supertrend indicator trading strategy goes. And I have also tested the supertrend indicator 100 times in the same way, and the results were pretty impressive.

In the long setup, only buy when the supertrend line turns green and goes below the candles, and the price is still above the 200 period moving average. Set your stop loss, at or below the supertrend line.

In the short setup, only sell when the supertrend indicator turns red and flips above the candles, and the price is still below the 200 period moving average. In this short set up, you can set your stoploss at or above the supertrend line.

So using the Trading Rush App to track my trades, I tested the supertrend strategy 100 times on the Euro JPY pair. But I quickly ran out of market data and had to switch to the Euro USD pair.

When I tested other indicator strategies 100 times, I used a fixed stop loss and profit target. So to keep things similar, I have used a fixed profit target and stoploss as well.

In the Trading Rush App, you can see the winrate and the profit graph changing as I take more trades. If you haven’t already, you can download the Trading Rush App from the Play Store, or using the link in the description. You can use it to keep track of your trades while backtesting your trading strategy.

While the backtesting clip is running, here are some important things and disadvantages I found about the Supertrend indicator.

Number 1. Supertrend Indicator, only shows the current direction of the trend. It cannot predict the trend direction. This is why it is better to use the 200 period moving average with the supertrend indicator if you are using it as an entry signal generator.

Number 2. You cannot blindly take every trades given by the supertrend. If you do, you will end up taking trades in the opposite direction of the long term trend as price gives many pullbacks in a long term trend.

Number 3. While testing this strategy 100 times, I found that I was losing trades, and was not getting a good risk to reward ratio, because the stoploss i was setting using the supertrend line was sometimes too far from the entry. Since price does not move infinitely in the same direction, most of the time, my stoploss was hit as price reversed before hitting the profit targets. So maybe consider setting your own stoploss using simple price action levels, when the Supertrend stoploss is way too big.

So after testing the supertrend indicator 100 times, I found that the win rate of the supertrend strategy is approximately 46 percent. Since I used the 1.5 to 1 reward risk ratio with other trading strategies in my previous backtesting videos, I have used the same 1.5 to 1 ratio with this strategy as well. And because of that, even with a win rate of 46 percent, I was able to make a profit. During this backtest, I was able to win 7 trades in a row. but also lost 7 in a row. Even though the supertrend didn’t produce a very good winrate like some other indicator strategies I have tested before, the Supertrend Trading Strategy is still a profitable strategy.

That’s all. Now you know more about the super trend indicator. Like the video if you liked it. Subscribe for more videos. Check out the Trading Rush App and Trading Rush Website for more back testing videos. Thanks for watching, and thanks to all the patrons who make these videos possible by supporting the channel on Patreon. You are Awesome.

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Divergence Trading Strategy – Trend Trading Exit Indicator?

Post author By Trading Rush
Post date July 31, 2020

trading divergence trading strategy

Tag: trading indicators

What is Divergence? Can it make you better at trading? If you have been trading for a while, you have probably heard the term divergence. It is not something you will get to see frequently on a trading chart. If it does appear in front of you, you should be very careful, because it can indicate a possible change in the direction of the current trend.

To understand how the divergence can help us in trading, we will first have to understand what divergence is.

The disagreement between an indicator and the price movement is called divergence. In simple words, Divergence occurs, when the price is saying one thing, but the indicator is indicating something else.

Let me explain.

Usually, in an uptrend, you will see oscillators and the price indicating the same direction of the trend. You can tell this by connecting the higher highs of the price and the higher highs of the oscillators. On this chart both the indicator and the price, are making higher highs. Or in other words, the oscillator looks very similar to the price movement of the chart.

But sometimes, you will see something like this. Here, if you try to connect the higher highs of the price and the indicator, you will notice that you can successfully connect the higher highs of the price, but the oscillator does not have a higher high. It has made a lower high. It has made a move that is not similar to the movement of the price.

This is what a divergence looks like. Now They are two types of divergence. When price makes higher highs, but an oscillator makes a lower high, it is called a negative divergence.

Similarly, In a down trend, when price makes lower lows, but the oscillator makes higher lows, it is called a positive divergence.

But how can this information be useful? If we see a divergence while trading, what should we do?

Well, here are few things we can do. When divergence occur, there is a chance that the trend can reverse, or go sideways.

In an uptrend, if you see a negative divergence, there is a high chance that the uptrend will turn in a sideways trend, or go in the opposite direction. If you have a position open, you should maybe consider closing it, or setting a stop loss, because there is a chance that the price will stop moving further in your favor. If you were thinking about taking a long position, it is good idea to wait a bit, as price can go lower.

In a downtrend, If you see a positive divergence, there is a high chance that downtrend will end soon, and it will be a start of a new trend. If you are already in a short trade, make sure you watch it closely, and adjust your stop loss carefully, as the price can go in the opposite direction and if you were thinking about taking any short trades, maybe consider watching the price movement from the sideline, and wait for a better entry condition, where there is no divergence.

Now, a lot of people, will tell you to take trades in the opposite direction of the trend when the divergence occur. I don’t recommend it, because there is a big problem with taking trades like that.

You see, when you spot a divergence, price won’t immediately go in the opposite direction. It can continue to move in the same direction, before finally changing the trend direction and when it will change the direction, there is no guarantee that it will go in the opposite direction. The price can simply go sideways for a while, and can continue to move in the same direction as it was before.
So, what’s the use of the divergence then?

Well, divergence is not that good when it comes to trade entries, as the exact time of the direction change is difficult to predict. But what you can do when divergence appear, is to avoid taking new trades, and adjust the stop loss of your open trades.

Here’s an example. Lets say, you are in an uptrend for a while. In this uptrend, you spot a negative divergence. Now you have more information on the trend direction. Now you know that there is a chance that it can reverse. With the help of this new information, you either close you long position and book a profit, or you adjust the stop loss to break even, so that you won’t lose money if the price comes down.

Now, what indicators are the best to spot divergences on a chart. Well, RSI, MACD, CCI, money flow index and Awesome Oscillator are great to spot divergence on a trading chart. To keep things simple, you can use RSI or MACD.

Here’s how divergence looks on these indicators.
As you can see, a good divergence can be easily spotted on all of these indicators. If you want to spot divergence while trading, you don’t have to look at every single one of these indicators. Using MACD or RSI will get the job done.

Here are some important points to remember about trading divergence.

Number 1. You should not trade with divergence alone. You should use it with other indicators. Divergence should be used to analyse the price movement better.

Number 2. Divergence won’t appear for every price reversal.

Number 3. If divergence occur, it does not mean that price is going to reverse, it can simply go sideways.

Number 4. It is very difficult to spot the exact timing of the reversal once you spot the divergence.

Number 5. If you spot a divergence, maybe consider closing or adjusting your open positions, as price can stop moving further in your favor.

Number 6. It is better to not act on divergence that are spotted in a range market.

Number 7. It is not an entry signal generator, so don’t use it as one.

Think of divergence like this.

Lets say, You are driving a car. When you step on the accelerator, the car goes faster, but the speedometer goes down. As you can see, there is a disagreement between the actual speed of the car, and the speedometer that is indicating the speed. This hints that there is something wrong with the car, or with the world the car is driving in.

Similarly, when you see the price movement, and an indicator on a chart at a disagreement, you simply wait, until you see them in an agreement.

That’s all. That’s what Divergence is all about.
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Best Part Of The MACD Indicator Trading

Post author By Trading Rush
Post date July 29, 2020

best part of macd indicator trading strategy