Building a trading setup - Divergence University Weekly - March 15th 2021

Hello everyone and welcome back to another weekly video for the Divergence University. My name is Jordan, I'm the chief trader in the Traders Academy Co-op, and today we're going to talk about a few trade examples that we find really interesting. Based on the, of course, previous week's market conditions. Now speaking about the previous week, keep in mind guys that the previous week was not the most volatile or the most technical week, okay? We started getting a bit of, um, volatility and some of the setups started developing closer to triggers, if you wish. Uh, near the end of the week, but in general it was not the best market condition, which means if you did not have any trades or if you had less trades than usual, if you're intraday trading, um, at least looking at it from our perspective, we're experiencing the same, right? When such conditions are happening, best would be to stick to the classical setups. Be disciplined. Do not go ahead and take risks which are unnecessary. Okay, worst case scenario, give it a week off the markets, go do something else, enjoy the free time, and then come back next week when probably, um, the conditions are already changed and we're starting to move once again. That being said, let's go ahead and check out these three trades, right? Eleventh and twelfth. Euro dollar is the first one. Here we're talking about a sell, right? The bearish conditions. Why am I not able to move? This is interesting. All right. Anyway, but yeah, again, we're talking about sales in euro dollar in this specific case. And when it comes to divergences, there are 2 very simple, um, things that you need to remember: market structures, which is basically price action and the structures which this price action is forming, and levels. So if you figure out how to do these 2 things, divergences are perfect instrument for trading. Euro dollar, first one is on the, uh, 1-hour chart. We can see that there is a long-term trend line which the market is trying to break, and this is the first warning sign here because after this breakout the price might be actually going and pushing higher. So Uh, I'm talking about this checkbox and checklist in the live trading sessions, but basically when I'm doing analysis for a given pair, I'm starting and checking everything that I have knowledge about— divergences, level structures, trend, whatever it is, right? I go ahead and make a list, and this list is telling me 3 things. Buy— sorry, this is supposed to be an up arrow. Neutral or sell. There is no other option on the list. And when I put together the list and I see I have 3, 4, 5, 6, 7 buys, okay, I have 0 neutrals and I have 1 or 2 sells, well, it makes sense to look for buys, right? Vice versa applies for the sells. So in this case, I'm already looking at one uh, condition which is suggesting that we might be actually— sorry— going up because this is not holding the trend line. Then what we can see is the divergences. So inside the pullbacks, we know that we might be looking at histogram divergence alone. And of course, levels— we can't do anything without the levels. Where are the levels at that moment? Right here. So this is where the price broke the previous time. Continuation, very slow, slow move down, right? Then we're stopping, consolidation again. Another attempt to push lower, rejected. And then we have again consolidation for quite a few hours. Then the move down starts again. So where did the price stop? Where do we have cluster of candles, most likely volume Right here. Where did the price stop on the first wave up? Right there. Okay, spikes, spikes, spikes, and pretty much we're holding the very first zone, the very first level. So pretty much this is, uh, where this divergence entry, um, comes from, right? This, this is the overall idea. If you want to be trading it a bit more conservatively, you can be waiting for the breakout of the low, you can be waiting for structures to form, you can be waiting for trend lines to broken. You can be waiting for conservative trendline breakouts. Plenty of options, right? But if you're strictly trading with divergences, um, well, basically that, that's what divergences do, right? They're trying to catch the absolute end of a trend, meaning the beginning of a new trend or the end of a pullback or whatever it is. But since they're in a way the most aggressive approach because they are the earliest sign of a possible end of a trend. They're also the most rewarding ones, right? We have people in the club which are trading, let's say, this. And imagine that this is your stop loss. It's, I don't know, fraction, just a few pips, but you're trading versus the bottom. So your risk-reward ratio here could be 1 to 5, 1 to 6 easily. Meaning that the win ratio versus risk-reward ratio here is compensating the strategy. Okay, pretty much what I'm trying to say is if you're losing more, like in this case, uh, you have very aggressively protecting your position, right? Not, not looking for something like this or that. And if it works You basically make a lot of money. So next time if this loses and the next one loses and the next one loses, you're still overall in profit. Okay, so, uh, with divergences, that's why we, we have chosen, uh, the risk-to-reward ratio of 1:2. And in all the examples you can see that we're trying to make more money than what we're risking. Okay. Because of the nature of the strategy. All right, so that's about EUR/USD. I think it's pretty clear setup, uh, structures and all that levels. And the DAX/CAD franc also ended up in negative, but the idea here was that this bullish move is already finished. And we're looking at the structure to the downside. We're looking at divergences before that, and here we started breaking lows. Now these lows I don't like. This is the real low, if you ask me. So if you say this is convergence, I wouldn't really agree with you, even though some people might consider this as a convergence. You know, technically is, but I don't know. I mean, in my opinion, this is a straight move up, and this is some kind of inner low. By all means, it is a low, it's just not a swing low, right? But anyway, the structure to the downside was there, and the idea here was to see pullbacks which are going to deliver the second wave. Now, in CAD/CHF, overall, we're bullish. Okay, but here the attempt was to, uh, catch the pullback, nothing more. Just trying to make sure we're all on the same page. If you're looking for buys and you're wondering why we're doing this, uh, that's why. Just trying to get you pulled back. So we have first one here. We have some kind of double structure and again levels. Look at it. This is where the level starts. Right there. Okay, we can split the top into multiple ways, but this is the most important and critical zone right here. And we kind of tested it, and this is where the divergence is appearing. This is also where you have a trendline breakout. And most of all, we finally got a bearish— strong bearish candle. Now if we go back to euro dollar, this very strong candle is missing. This is more aggressive level. Yes, in place structure much better, much clearer than CAD franc. But if you're waiting for a strong candle, it's not there. It's simply not yet. So that makes this trade more aggressive as opposed to CAD franc where we had the big huge candle right here. Okay. Then we have the NASDAQ, which actually started pushing to the upside, right? Um, the idea here is simple. Again, we have a structure and we have the top zone, and I would say here— let me just grab this tool so we draw it as accurate as possible. That would be the level I would be looking for. So this one, this one, and let's see, where is it? I guess here, right? Something like that. So let's extend it and then we can see where we stand. So the first zone was tested, second level I marked was not really reached, we're missing a few pips, but this is where we are getting the rejection. Right here, price is rejecting with this powerful bearish candle. And if you're trading waves and you're asking yourself, all right, but why are you looking for sells after this? Well, very simple. After this structure is completed, we might be expecting a pullback, right? So if that would be, um, the level— let me just remove everything and now focus on the downside for the targets. Look at this zone. I mean, this is pretty classical and very easy to be identified. I would also, by the way, pay attention to this one. I know the risk reward is probably not allowing to use it if you're using 1:2 or something like that, right? But it is an important level by all means. So First, second, third zone. Okay, I now have levels to work with. So if this is correct and we have 1, 2, 3 pullbacks, then we don't know whether this is actually going to be a pullback, something like that, or it's actually going to start developing the next momentum to the downside. We don't know. What we do know is that we expect a move down. Pullback or new trend? No clue. Well, we do have a clue because this is 3, it is supposed to be 2 to the downside. That's regardless, right? The idea is to catch this move down, and this is the strong— strongest zone if you ask me. So having the target slightly to the top of this level, in my opinion, is, uh, a good call, right? Because if your target is slightly below or at the very bottom, you're risking for the price to do something like this and then bounce. Okay, you have consolidation here as well, easily could be happening, right? So, uh, that's pretty much the idea about NASDAQ, and this is all the examples actually from the previous week. So, uh, any questions, please direct them to support Telegram right below the video. As you wish, we're there for you guys, and we'll be glad to reply any questions that you might have. Have a wonderful weekend, and I'll see you in the next videos. Bye for now.