USOil WTI Short 4Hour divergence- Trendline
1. Market Analysis:
Asset: USOil (WTI Crude Oil)
Timeframe: 4-hour
Pattern: Bearish divergence identified
Additional Confirmation: Trendline resistance
2. Entry Criteria:
Divergence Confirmation: Identify bearish divergence on the 4-hour timeframe using indicators like RSI or MACD. Bearish divergence occurs when the price forms higher highs, but the indicator forms lower highs.
Trendline Resistance: Confirm that the price is approaching or touching a significant trendline resistance, which has been respected in the past.
3. Trade Setup:
Entry Point: Place a sell order near the trendline resistance once bearish divergence is confirmed and there is a rejection from the trendline. You can enter the trade at the close of a bearish candle that forms near the trendline resistance.
Stop-Loss: Set the stop-loss order above the recent swing high or slightly above the trendline to limit potential losses if the price breaks through the resistance.
Take-Profit: Determine your take-profit target based on key support levels or a favorable risk-reward ratio. Consider using a risk-reward ratio of at least 1:2 to ensure that potential profits outweigh potential losses.
4. Risk Management:
Position Size: Calculate your position size based on your risk tolerance and the distance between your entry point and stop-loss level. Ensure that you only risk a predetermined percentage of your trading capital per trade (e.g., 1-2%).
Risk-Reward Ratio: Aim for a risk-reward ratio of at least 1:2 or higher. This means if your stop-loss is 50 pips above your entry, your take-profit should be at least 100 pips below your entry.
5. Additional Confirmation:
Volume Analysis: Check for an increase in volume to confirm the validity of the bearish divergence and the potential for a strong downward move.
Support and Resistance: Ensure that the trade aligns with key support and resistance levels on higher timeframes (e.g., daily or weekly).
6. Trade Execution:
Place Orders: Set your sell order, stop-loss, and take-profit levels according to the above criteria.
Monitor the Trade: Keep an eye on the trade to manage it effectively. Adjust the stop-loss to break even or trail it as the trade progresses in your favor if necessary.
7. Review and Adjust:
Post-Trade Analysis: After the trade is closed, review the outcome to learn from the trade. Evaluate what worked well and what could be improved for future trades.
Example Trade Setup on TradingView:
Asset: USOil (WTI Crude Oil)
Timeframe: 4-hour
Pattern: Bearish divergence identified
Additional Confirmation: Trendline resistance
2. Entry Criteria:
Divergence Confirmation: Identify bearish divergence on the 4-hour timeframe using indicators like RSI or MACD. Bearish divergence occurs when the price forms higher highs, but the indicator forms lower highs.
Trendline Resistance: Confirm that the price is approaching or touching a significant trendline resistance, which has been respected in the past.
3. Trade Setup:
Entry Point: Place a sell order near the trendline resistance once bearish divergence is confirmed and there is a rejection from the trendline. You can enter the trade at the close of a bearish candle that forms near the trendline resistance.
Stop-Loss: Set the stop-loss order above the recent swing high or slightly above the trendline to limit potential losses if the price breaks through the resistance.
Take-Profit: Determine your take-profit target based on key support levels or a favorable risk-reward ratio. Consider using a risk-reward ratio of at least 1:2 to ensure that potential profits outweigh potential losses.
4. Risk Management:
Position Size: Calculate your position size based on your risk tolerance and the distance between your entry point and stop-loss level. Ensure that you only risk a predetermined percentage of your trading capital per trade (e.g., 1-2%).
Risk-Reward Ratio: Aim for a risk-reward ratio of at least 1:2 or higher. This means if your stop-loss is 50 pips above your entry, your take-profit should be at least 100 pips below your entry.
5. Additional Confirmation:
Volume Analysis: Check for an increase in volume to confirm the validity of the bearish divergence and the potential for a strong downward move.
Support and Resistance: Ensure that the trade aligns with key support and resistance levels on higher timeframes (e.g., daily or weekly).
6. Trade Execution:
Place Orders: Set your sell order, stop-loss, and take-profit levels according to the above criteria.
Monitor the Trade: Keep an eye on the trade to manage it effectively. Adjust the stop-loss to break even or trail it as the trade progresses in your favor if necessary.
7. Review and Adjust:
Post-Trade Analysis: After the trade is closed, review the outcome to learn from the trade. Evaluate what worked well and what could be improved for future trades.
Example Trade Setup on TradingView:
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