Here we have New Zealand dollar against United States dollar on a four hour chart.
In the second part of the chart, we can find higher highs and higher lows, so we can say that the price is
in an up trend. Let's add the relative strength index and check if we can add more value to this analysis.
So "insert", "indicators" and "relative strength index".
I want to apply the oscillator to high because the price is in an uptrend. So here we have the RSI
and I'm going to draw my vertical lines to check each high.
The first one is here, then
we have another one here. Going on,
another high is on this green candle
and the last one is here on this candle. On the RSI,
nothing weird between the first two highs.
The value is growing. Then on this new high,
the RSI is at a lower level compared to the previous high.
So we have a divergence.
So at this point we can start to look for a candlestick pattern that gives us a good chance to enter
a short position.
Right here, we have a bearish engulfing pattern.
So this is the first good chance to open a short position. Then here, right on the divergence,
we have a shooting star that is another amazing opportunity to open a short position. Going on, we see
that actually the price went down and our analysis with the divergence was correct.
Maybe we had a new high here,
I'm going to draw another vertical line.
This new high actually forms another divergence because the RSI line is lower than the previous level,
so it only confirms our view of the markets.
As you may have noticed, trading with the divergences let us take the trade against the trend, trying
to catch a new trend. This is not something that I usually suggest but I don't want to close the door
to new opportunities.
So my advice is: try it.
You never know what is going to work for you if you never try.
You have a demo account where you can try different strategies for free.
So you have nothing to lose.
Practice, practice, practice! And see if it's going to work for you.