Jordan reviews EUR/USD, EUR/CHF, USD/CHF, and gold trades from April 12-16, showing how negative correlations between currency pairs help manage risk. He prefers moving-average divergence on higher timeframes, warns against relying on histogram divergence, and emphasizes distinguishing false breaks from real reversals before adding new techniques to your trading.
Chapters
Hello everyone and welcome to another Divergence University weekly summary. My name is Jordan and as you probably know by this time, guys, we're going over the previous week's interesting situations and examples and basically trying to figure out what would be the best filter, what would be the best analysis and approach to this specific setup. So basically the previous week started and ended from the 12th until the 16th, and the few trade examples that you see here are what we found To be basically fitting into our trading style, into our directions more or less. So let's go ahead and check them out. Euro dollar and dollar franc are the two pairs which, as you can see at the moment, they both lost. Okay, and that is probably a good example of trading correlations. So these 2 have very strong negative correlation, which means if this one goes up, this one is likely to go down. If they have positive correlation, usually this is going up and this is going up, right? But the idea of correlation is that you're basically, especially if the correlation is strong, you're basically exposing yourself to the same asset. Twice or more. So if you're trading highly correlated pairs, it's probably a good idea to first of all understand the degree of correlation they have, and second of all, if needed, to decrease the risk a bit. Now back to dollar franc. This is the 4-hour chart, right? The 4-hour chart started, and this one is pretty short. In terms of analysis and ideas here, because you have a complete structure to the downside. You have a fantastic level which was false broken right here for the first time, false broken for the second time, and right here it's actually closing above this level. And basically looking for at least pullbacks, right? Whether the price is going to continue down later Assuming that we get the pullback or not, we don't know. But the the least we are expecting is for the price to provide this pullback right here after the facts that we see on the chart. Push pushing down almost immediately. Euro dollar on the one hour chart doing more or less the same, right? If dollar franc was going down, we would expect euro dollar to go to the upside. So here there could be multiple ways to to have a count on this wave up, right? The whole structure. But at the end of the day, this is where the divergence appears. Now for me personally, when it comes to trading the pullback or the end of the move, as in this case, basically we have bullish move and I'm trying to trade. In the opposite direction, right? Most of the times I will be waiting for moving average divergence, right? I would not be waiting for this one, especially not continuing divergence. At least PMP divergence, as in this case. So you have the histogram divergence, no divergence here, all right? This I will allow myself to do. But continuing, no. Okay, only if it's on higher time frames or inside an extreme of some sort, or I have some extra verification that this divergence is about to kick in. Okay, so this is probably a bit more aggressive setup. The next thing I would like to mention here is that from the actual swing points, there was no false break. And the further we go, the more aggressive this setup goes, right? For me personally, this is very hardly considered a 2-wave structure right here. And again, that's the beauty of the market. You will see it as 2 waves, someone else is going to count it as 3 waves, right? It never ends. The question is which setup, not which setup, but the view that you have, you must stick to that because if you're in general using only some kind of real swing points in your analysis and then you watch this video and you're like, okay, but this is tradable, and then you immediately switch, then you will not get too far, okay? You need to figure out what's your trading style, you need to master this trading style and this trading technique and only then start adding on top of that, but there must be a foundation, right? There must be something that holds everything else that comes afterwards, new knowledge, new skills, new techniques, whatever it is you must have this foundation to start building on top of it. So that's about EUR/USD. EUR/CHF. Well, here the situation is slightly different because on the 4-hour chart we can see the price was definitely pushing in the upside starting from the end of February, or we can say the beginning of No, actually it's— sorry, uh, end of January, my bad. So basically February through April or mid-April, we see that bullish push, actually beginning of March, and then we're looking at the consolidation, right? This is the very first thing entirely based on pure price action that we can notice. Once this pullback started it becomes kind of clear that this is going to be a pullback rather than a reversal. Because look where the move up ended, and that's the last swing that we created on this push up. And then during all this period, even if you count it in terms of time, okay, let's say it's approximately the same amount of candles or time But during that entire time, look how far to the downside it went compared to how far to the upside it went. So it makes sense that this is some sort of consolidation without knowing waves, without knowing cycles, without knowing any of that. So the next thing we should be looking for, of course, is structures. Now here we can have multiple structures. But at the end of the day, this is where we arrive. At least this is where I arrive and with my analysis, and this is where the divergence is formed. This divergence comes pretty close to the bottom. So if we look at that as a range, sorry, horizontal range like this, we're somewhere at the bottom of it. Okay, I'm not sure if we can fit, um, a channel here, but it would be pretty close to it. So you can see the, the point where the horizontal level and this alternative trendline level would be coinciding. Now, this alternative trendline, you don't know whether it's going to be a trendline or not until after we form a bottom here because you only have one touch point. So this is really not the way to go and use it. The only logical way to go ahead and use it is to draw this line and then go ahead and project it here, right? We can do that in MT4 pretty easy. And that's it. You have a projection, but you don't have a real trend line. But more or less, we get the point that this zone becomes a zone of interest. And as I said, this is where the divergence ends. Now on the 4-hour chart specifically, again, this structure right here I don't like. I'll be definitely trading this move from here to here on the 1-hour chart because for me this is kind of consolidation and then push down, right? I can't really go ahead and put there swing lows or swing highs to work with, right? The price is too close for this specific time frame. So again, I will be probably looking for this move on the lower time frame. And let's say I'm looking for bearish structure like this. That makes it my 5th wave. And then I'm going to be looking at this 5th wave to finish somewhere on the lower time frames and then look for the attacks. Again, this is just for me personally. Okay, many, many other traders will be looking at this situation completely different, or at least slightly different. So figure out the way that works for you and stick to that. All right, um, let's see gold. I think gold is actually the last one. Yeah, so let's cover it very quickly and We're going to be done very soon. Now gold, it made this dramatic move to the upside, uh, pushing through this level. And this is the really important part here, pushing through that level. So if you're going to be looking for buys, naturally you want to see the price pushing above, bouncing, and continuation, right? Push— sorry, not above in this case, pushing right into that level or close to that level and then pushing up. Right. So I treat these levels very, very easy. If that's my zone or a level, as long as the price is holding above it, that would become a bullish scenario for me. Right. So basically the price was below that. This is bearish territory. We come here, we start testing it, divergences are formed, but there is no way for the price to continue lower. Eventually it pops up and we start trading above it. Now we're back to the, uh, to the actual bottom of this zone, but we never managed to go below it. You see, very, very clear range. What does that mean? Well, just like we mentioned in the previous example, push up We look at the time, we look at how many points, in this case not pips, went up, and then we look at the time and we see how many pips or points it pushed to the downside. So it looks like we're dealing with a pullback here. If we're dealing with a pullback, we want to be looking at the levels, we want to be looking at breakouts, we want to be looking at false breaks, we want to be looking at divergences. All that starts appearing in this very same chart. And the very first divergence we can see right here, then we have another one, and now we don't have MA divergence, you see. So there is a way for this thing to probably push lower a bit more and create one more wave to the downside, but having 2 false breaks, being at the bottom of the zone, pushing like crazy to the upside, and basically everything which I mentioned to do the last 30 seconds, plus this is a clear convergence here, the price is breaking above it. In my opinion, this kind of setup is definitely worth the risk, even if you're going to split it or decrease the initial risk and leave some room for another false break and another attempt here if it's created. I think definitely worth it. Okay, so that would be all for the, uh, the Divergence University. If you have any questions, please find us in the Telegram groups or leave a comment below, and we'll get back to you as soon as possible. Thank you and have a wonderful week.
