This article will go over the Youtube Live video available below. We'll deconstruct it and take you through each of the steps. If you haven't watched it, please do. If you have watched it, then you'll be able to easily follow the steps below.
In the video, we discuss how we can utilize a variety of indicators in order to make safe predictable trades on the lower intervals. This is called scalping and can be very beneficial to building up your long term portfolio.
This is just one strategy used by our team and others out there. Don't think this is the only strategy, and you're welcome to use this to build your own version of it.
Please make sure you do not just jump into trades and think you can make profitable trades. It can take time to get used to it. Our suggestion is to paper trade or simply mark areas on the chart with arrows where you would enter and exit the market. Not always will this be accurate, but practice makes perfect. You'll be more likely to spot false entries the more you practice these methods.
Practice. Practice. Practice.
In addition, these entries can be quick. They can last 5-10 minutes or if the price is moving in your direction, they can last 1-2 hours if not longer. But in the end, take your profits. Just because you exited early and only made $200 off of the trade when you could have made $1000 if you stayed in, doesn't mean you lost money. You made $200. That's all that matters. Take your profits, and look for the next trade.
Margin trading is reserved for people who:
Have tested this strategy extensively by both paper trading and real trading
Understand how to use margin properly.
Do not use margin if you do not know what you're doing!
Finally; Try not to short a market that is extremely bullish, unless you know what you're doing. In the examples below, they both executed shorts, but it was simply because we needed an example of the two strategies and they saw an opportunity to short and took them. They have years of experience, so please keep that in mind.
As it stands right now, the market has been extremely bullish so the majority of their trades have been long. Shorts can be dangerous and can wipe out your entire portfolio. If you do not know how to short, do not use it!
The one thing to pay attention to in both of the methods below is both of the traders utilize higher intervals. When we execute a trade on the 2-minute chart, we need to see whether the 5, 10, 15, 30, etc.. minute charts are all showing the same signal. This is because if we know the higher intervals are bullish, we can guarantee our entree on the lower intervals can be somewhat fool-proof. We can let the order run a bit on the lower interval even if we start off in the red for a few intervals after entering the trade because we know what the long term outcome will be.
First, let's watch the pre-entry and listen to Roland's breakdown of what he is looking at.
The first thing we notice is the indicators on his screen:
Usually having more than 3-4 indicators can be counter-productive, and as he talks about his trade, you can see he is mainly paying attention to RSI, Aurox Indicator, and TD Sequential for his entries. He will utilize the Aurox Lines and DI for his exists later on.
RSI Divergence is used often by Roland to execute trades, and it's the same thing here. An RSI divergence happens when the price highs or peaks, do not match the RSI peaks. Or when the price troughs do not match the RSI troughs. Below is a very easy explanation of this phenomenon.
The blue lines above are the price action, and the red lines are the RSI indicator.
In the first top left section where it displays the Bearish regular divergence, you can see the price established a new higher peak, but the RSI established a lower peak. This signifies a bearish movement and as we can see the blue price line dropped right after the second peak.
A bullish divergence is the inverse of this. The price troughs will establish lower points, whereas the RSI troughs will establish higher points.
There is a lot more to it than that but as a beginner and to apply this on your own, just understanding this one concept is enough. We will cover more details about RSI in later videos and articles.
Let's take a look at the areas Roland highlighted and see if we can spot a divergence.
As we can see from the above screenshots, the price established a new higher peak, but then the RSI established a lower peak. This implies there was a RSI Bearish Divergence. As we can see from the price movement right after the divergence happened, it dipped significantly right after the peak and then came back up a little.
Roland decided to wait until the second cycle at 19:00 began before entering the trade, but before doing so, he confirmed his trade across multiple intervals:
Aurox Indicator triggered a short just 1-2 intervals beforehand on the 2-minute chart
30-minute interval showed TD sequential at 8, which means the long term upward trend on the 30-minute interval is tiring and the RSI is signifying it is overbought.
15-minute is also showing TD sequential past 9, which also signifies the uptrend is ending. In addition, the Aurox short indicator has recently triggered.
Hourly is showing TD sequential at 5, which isn't necessarily high but anything above 5 can start to signify the trend is ending.
4 Hour TD sequential is also showing the upward trend is ending as it is past 9.
And one other item Roland did not discuss in this video is we can see the DI line (the neon blue line indicator) has crossed below the 0 line. This also signifies a bearish movement.
Could we have had more confirmation lining up at the same exact time? Sure, and that's a decision you will have to make. The more everything lines up, the more likely your trade will be correct. For example, if every interval shows a short on the Aurox indicator at the same time TD sequential shows it's 9 on every interval, while at the same time the RSI diverging on every interval. But these very rarely happen. Instead, we definitely see multiple confirmations (5+) on multiple different intervals so the risk to reward ratio is very high.
Entering The Trade
Let's watch the video below of Roland entering the trade, and we'll discuss it afterward.
The first thing you notice is that he is using leverage. Again, this is not necessary nor should you do it if you are not experienced.
The second thing you will notice is after he entered the market, he confirmed his trade again to make sure his initial indication was correct. This is done by going through the higher intervals and repeating the process before the entry.
Finally, since we entered the trade on the lower interval, we should monitor the trade constantly. Unless we have a high indication that the market is just going to keep going in a specific direction, we should monitor these trades closely, and take our profits quickly.
Exiting The Trade
There are several key things to take into consideration when exiting the trade. Do not be afraid of taking profits early. Taking a 2-3% gain is great! People in this business are expecting 100s of percentage gains because it does happen from time to time, but those trades are like winning the lottery. They're risky and they can be far and few in between. Our goal is to slowly chip away and build up our portfolio.
2-3% gain per day when scalping is 600-900% over an entire year, but of course, we don't expect someone to trade every day. Even a 100% gain per year scalping is considered great, and that money can be put back into your long term investments.
Of course, this doesn't mean to be trigger happy to exit every position soon as you see 2-3% gain. You should be monitoring every interval higher than the lower interval to see how far you should let the price run. If the market is bullish, you found a great low entry point, and all the indicators on the higher intervals we discussed above are showing green, let it ride. If we start to notice all the indicators showing reversal on multiple intervals:
TD sequential is showing trend exhaustion and showing 5, 6, 7, or higher
DI indicator is returning and crossing the 0 line
RSI is returning back from either overbought or oversold levels
Then it is the right time to try to exit our trade and take our profits.
In addition, in the above video, Roland also discusses MA/EMA cross. This indicator shows the moving average of the price, and naturally, the price always wants to be near the MA line. If it deviates higher than the MA line, it will naturally try to come back to it. This can a sign where you should expect the price to move to (pictured below).
Although Taras uses very similar indicators, his strategy is a bit more lightweight and uses fewer indicators, as well as a different workspace setup. Let's watch the video below and we'll break it down. You don't necessarily have to watch it all, because it simply shows off the ROE for a few minutes after the entry.
What isn't shown in the above video is a few things:
Taras has other workspaces set up to monitor higher intervals. Instead of having multiple charts on the same workspace, he executes orders, he has another workspace where he will have 3-4 charts on different intervals. Once he spots an entry, he will flip to his trading workspace and execute the order there.
Taras still utilizes higher intervals in order to find entries on the lower ones.
Now, let's break it down. The following indicators are used by Taras, a couple which are not shown in the video:
DI - Setting 15
DMI - The default setting
Aurox Indicator (not shown)
Fib numbers to detect key resistance and support levels
In this strategy, he takes into account 5 minute, 15 minute, 1 hour, and even 4-hour intervals.
The first thing he will look at is the Aurox indicator triggers on the higher intervals. If the Aurox indicator is showing a short on the 4-hour, chances are it's safer to take a short on the lower ones, and vice versa. But only after confirming with the other indicators.
In addition, he uses DI on the higher interval to confirm the demand and trajectory of the price.
If the DI indicator has recently crossed below the 0 line, that means the demand has dropped or will drop. This can signify a short.
If the DI indicator has recently crossed above the 0 line, that means the demand has gone up or will go up. This can signify a long.
Directional Moving Indicator
The next indicator is the DMI indicator.
When the DI+ line crosses above the DI- line, it implies price is bullish
When the DI+ line crosses below the DI- line, it implies price is bearish.
Demand Index Plus DMI Plus Aurox Indicator
When these two indicators show the same signs (both become long/bullish or both becoming short/bearish) at the same time or within a couple of intervals of each other, this can signify a strong trend.
Then on top of it, if the Aurox Indicator has also confirmed the direction by triggering around or near the same interval, then we can start looking for entries on the lower intervals. Let's take a look at an example situation below on the 4-hour chart below:
As we can see from above, we triggered a red arrow on the interval at 12:00 on February 16th. Right around that time we also had a strong cross down on the DI indicator below the 0, and the DI- (yellow) crossed above the DI+ (blue).
This should have been our indication to look at the lower intervals and find a proper entry point. Now let's take a look at the 2-minute chart.
Again, just like on the 4-hour chart, we had a red short on the Aurox indicator, right around the same time we saw the DI cross below the 0, and the DI- crossed above the DI+. This happened at 12:38 on February 16th, so within the same interval as the 4-hour chart, we analyzed above.
That giant red wick would have been our call to short. Even if we had entered at the bottom of that red wick, the price dropped significantly after that. As much as 6%!
Exiting The Market
As we saw from the video above, Taras utilized Fib numbers to plot out a proper exit point. He mapped out the area between 0.618 and 0.786. This area is often used by traders to detect strong support and resistance areas. That doesn't mean always rely on this area to exit your trades, you should take profits as often as possible.
By knowing where the support is, he can exit his trade just encase the price bounces on the support and reverses. Sometimes it will bounce slightly and then break through, but as a good rule of thumb, exiting your trades in these areas is preferable.
If you do not know how to draw fib numbers, it's very simple. To find the support areas, we look at the past data, and draw the line from the lowest peak to the highest peak in that range. To find the resistances, we draw the line from the highest peak to the lowest peak. The more intervals that are included in our fib numbers, the stronger the support or resistance.
Let's take a look at the example above from February 16th.
If we draw the fib number from the start of the 16th, all the way to the peak where we entered the short, we can see the area between 0.618 and 0.786 is highlighted in red. That would have been our first area to take profit. Did the price go down further? Sure, but again, that was a quick and easy 6% gain. We'll wait for another great entry and make more money later.
If you do not know how to draw fib lines, we can utilize Aurox Lines indicator and look at historical support and resistance lines.
As we can see from the picture above, there was a very strong support established earlier that day which lines up with the same exact area as before.
These two strategies are just two of many strategies available to traders. The main points to take away from this:
Use the higher intervals to your advantage
Utilize multiple indicators, 3-4, to cross confirm the signals
We'll discuss other strategies in the coming weeks, and happy trading!
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