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99% Of Scalpers Missed This “Double VWAP” Hack (VWAP Heiken Ashi Trading Strategy) - YouTube
Channel: The Secret Mindset
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Why it is so hard to make consistent money
day trading or scalping?
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Because you are probably have the wrong indicators,
and you’re using them in a wrong way.
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I’m fixing this problem today and you’ll
discover a consistent way to trade and read
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the market, just by using VWAP indicator and
Heikin Ashi candles.
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Before we start, if you want to show your
support, please drop a like to help us with
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Youtube algorithm and turn on the bell, so
you don’t miss when new videos are released.
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Professionals rely on two important factors
when making trading decisions— Price and
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Volume.
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These two elements tell you everything you
need to know about price and where it may
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be headed.
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So it makes sense that you must develop a
POWERFUL strategy that is based on price and
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volume.
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With this scalping strategy, I keep my charts
relatively clean, with a minimal number of
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indicators displayed.
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Here is what I have on my charts:
1.
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Price action in the form of Heikin Ashi candlesticks
2.
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Volume Weighted Average Price (VWAP) indicator
3.
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Optional, one momentum oscillator, to find
periods of expansion or contraction and to
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identify divergences
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Heikin Ashi
Heikin Ashi are visually appealing because
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you can easily filter the price of the present
move of the overall trend and provides a clearer
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visual representation of the trend.
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Heikin Ashi candlesticks are different from
normal candlesticks.
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These price bars are average bars and it does
not reflect exact open, highs, lows and closes
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for that period like a normal candlestick.
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The various bullish or bearish reversal patterns
consisting of 1-3 candlesticks are not found
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here.
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There are no hammers or engulfing candles
Rather, these candlesticks can be used to
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identify potential reversal points and, more
important, trending periods.
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These charts are filtered from noise, thus
making the short-term trend easier to observe.
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So these charts will help you to view trends
and identify potential reversals.
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The Heikin Ashi candles are totally different
in appearance when a strong trending move
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is underway relative to pullbacks.
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Upward trending moves typically have long
upward candles with very little or no lower
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shadows.
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When a strong uptrend is underway, and the
buying is aggressive, the lower shadows will
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typically disappear.
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The same concepts apply to downtrends, except
strong down trending moves will be composed
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of Heikin Ashi price bars with little or no
upper shadows.
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The bars will also typically be long and moving
lower.
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During pullbacks or weak trending moves, you’ll
see lots of bars with lower and upper shadows.
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This doesn’t necessarily indicate a reversal,
but it does mean the trend is in a corrective
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phase or slowing.
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So typically during strong trending moves
you’ll see strong up bars with no lower
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shadows, and strong down bars with no upper
shadows for a downtrend.
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And just because one up candle, or a couple
of candles with upper shadows, appear during
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a downtrend doesn’t mean the trend is reversing
– it may just be pausing.
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The same is true for uptrends.
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VWAP
Volume Weighted Average Price, or VWAP, is
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probably the most important technical indicator
for day traders and scalpers.
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Essentially, VWAP is a moving average that
takes into account the volume of the shares
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being traded at any price.
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Other moving averages are calculated based
only on the price of the stock on the chart,
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but VWAP also considers the number of shares
in that stock, that are being traded on every
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price.
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Basically, VWAP is an indicator of who is
in control of the price action - the buyers
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or the sellers.
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When a stock is traded above the VWAP, it
means that the buyers are in overall control
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of the price and there is a buying demand
on the stock.
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When a stock price breaks below the VWAP,
sellers are gaining control over the price
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action.
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VWAP is often used to measure the trading
performance of institutional traders.
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Professional traders who work for investment
banks or hedge funds and need to trade large
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numbers of shares each day cannot enter or
exit the market by just one single order.
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The market is not liquid enough.
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Therefore, they need to process their orders
slowly during the day.
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After buying or selling a large position in
a stock during the day, institutional traders
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compare their price to VWAP values.
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A buy order executed below the VWAP would
be considered a good fill for them, because
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the stock was bought at a below average price
(meaning that the trader has bought their
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large position at a relatively discounted
price compared to the market).
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Conversely, a sell order executed above the
VWAP would be considered a good fill because
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it was sold at an above average price.
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This is how VWAP is used by institutional
traders to identify good entry and exit points.
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Institutional traders therefore try to buy
below or as close to VWAP as possible.
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Conversely, when a professional trader has
to get rid of a large position, they try to
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sell at the VWAP or higher.
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Day traders who know this, may benefit from
this market activity.
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If there is a large institutional trader aiming
to buy a significant position, the price will
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break over the VWAP and move higher.
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This is a good opportunity for us day traders
to go long.
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Conversely, if there are big players wanting
to get rid of their shares, they start selling
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their shares at the VWAP.
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The price will reject the VWAP and start to
move down.
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This is an excellent short selling opportunity
for day traders.
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If there is no interest in the stock from
market makers or institutions, the price may
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trade sideways near VWAP.
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And you will want to stay away from that price
action.
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I hope you see how trading based on VWAP will
keep you on the right side of the trade.
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VWAP Bands
Well informed traders know that VWAP is a
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“must have” indicator.
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However, it takes an experienced trader to
understand when price is overbought or oversold
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in relation to VWAP.
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This skill is essential to finding and trading
the best opportunities.
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The key aspect of the VWAP indicator are its
bands, based on standard deviation.
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This VWAP bands reveal hidden support and
resistance that are based off the standard
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VWAP indicator.
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These bands allow even the most novice traders
to identify undervalued and overvalued price
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zones.
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By studying how the price interacts with the
VWAP bands, you can begin to discover the
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price-action characteristics of that market.
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And I prefer to add not just 1 set of bands,
but 2.
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One VWAP with standard deviation bands of
1, and the second one with standard deviation
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of 2.
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This way you get multiple levels of dynamic
support or resistance.
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Strong buying pressure above VWAP (or strong
selling pressure below it) is an indication
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that market participants are seeking to push
price to a new area of value.
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When this type of aggressive buying (or selling)
occurs, it usually leads to significant moves
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in the market.
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The beauty of the VWAP bands is that they
reveal these hidden areas of support and resistance,
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allowing you to see value opportunities like
the Pros!
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The ability to see these hidden levels allows
you to anticipate price movement at important
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action zones.
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In essence, as price trades away from VWAP
(the blue center line) the bands above and
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below it become targets.
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Likewise, as price reverses from the outer
bands the probability of reaching VWAP increases
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significantly.
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So how do you actually take signals, using
VWAP and Heikin Ashi.
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Well, when analyzing the market, you must
look for specific signals to determine the
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best point of entry and exit.
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Ideally, the more signals appear in a specific
price point, the stronger it is.
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In the context of trading, we call this a
confluence.
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To be able to spot confluences in a price
chart, you first need to have a decent grasp
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on basic technical analysis concepts.
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This means identifying and plotting support
and resistance levels.
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Confluences appear in the chart as a merging
of two or more elements in a certain price
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level.
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Points where a support or resistance level
aligns with VWAP bands.
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These are key areas to buy or sell a position.
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In this example you can clearly see how the
price shifted to a downtrend channel.
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However, the downtrend channel ended when
the price hit a major support level here.
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At this level, we also had VWAP lower bands,
revealing that sellers are losing steam and
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buyers are starting to get aggressive.
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Once we identified a possible confluence point,
we just need to analyze price action, using
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Heikin Ashi.
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Green candles forming after the price rejected
the confluence area means a shift in momentum.
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This area turned out to be a great support
confluence point and a strong level to consider
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an entry position.
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Stop loss always goes below the support level,
below the confluence area.
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And you take profit as the price reaches VWAP
bands, partially closing a part of your position.
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Here the price met a major resistance level.
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At this area, we also had VWAP upper bands.
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So we found our possible resistance confluence
area.
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Now we just need to read price action, using
Heikin Ashi.
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Observe how the price rejected our area, with
several red candles.
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A good entry signal.
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We then had a strong downtrend, shown by these
consecutive red candlesticks.
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See that the bearish price action has no upper
candle wicks.
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This indicates that the declining momentum
is strong.
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Stop loss above the resistance level.
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And profit targets at VWAP bands, depending
on recent price action.
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In this chart we identifed at least three
points that indicate the support level.
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Then, we also found this rising trendline.
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And of course the VWAP bands.
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As expected, price found support around our
confluence area.
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After this, we identified the first green
candlestick with no shadows.
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This is a good signal that a strong bullish
trend might be starting.
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The advantage of this strategy is that you
combine price and volume, and at the same
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time you eliminate noise by using Heikin Ashi.
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And you also rely on both static and dynamic
support and resistance levels.
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Powerful stuff!
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If things are unclear, or you find a setup
and you don’t know if the confluence area
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is worth trading, you can add a momentum oscillator,
for confirmation.
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In this example, after this consolidation
above the support level, price made a strong
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breakout rally and found resistance right
here.
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The VWAP bands are also positioned in this
area.
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On top of that, we can clearly spot a Bearish
Divergence pattern on the RSI that had formed
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when price stalled at the static resistance
and VWAP bands resistance.
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This price level represented a high-probability
resistance confluence point and a strong level
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to consider a short position.
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In this example, these are the things you
should notice right away:
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This support level, where price has tested
the area on previous occasions and the level
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held.
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Then notice that there are VWAP Bands as well,
providing another confluence factor to that
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support level.
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And RSI showed a bullish divergence, meaning
price action and the RSI are no longer showing
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the same momentum.
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A bullish divergence is signaled when the
RSI indicator has a higher low that correlates
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to lower lows in the price action.
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This showed increasing bullish momentum
As heikin ashi changed colors from red to
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green, we enter a long trade, with a stop
loss below the confluence area
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Here, notice this support level that was broken,
and price was heading up….so this was a
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potential support-turned-resistance level.
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The confluence trading factor comes into play
here, when you notice that VWAP Bands align
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right in this area
And for momentum confirmation, you look at
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the MACD.
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A bearish divergence is present, with a lower
high on the MACD that correlates to higher
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highs in the price action.
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This means decreasing momentum and a posible
reversal in the uptrend.
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This is confluence trading with price action
and momentum confirmation.
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As always, if you got any value from this
and learned something new, drop a like to
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Until next time.
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