If you keep entering too early, you’ll keep getting stopped out (you do use stops right?!) and you’ll slowly rack up losses.
And you know what happens when even small losses accumulate, you’ll end up broke.
You’ll end up with a divergence between your mind and your wallet regarding your wealth.Below are a couple of tricks of the (divergence) trade that you can make use of so that you have more confirmation that the divergence will work out in your favor.
Wait for an indicator crossover.
This ain’t so much a trick as it is a rule. Just wait for a crossover of the momentum indicator.
This would indicate a potential shift in momentum from buying to selling or vice versa.The main reasoning behind this is that you are waiting for top or bottom and these can’t be formed unless a crossover is made!
In the chart above, the pair showed lower highs while the Stochastic already made higher highs.
Now that’s a bearish divergence there and it sure is tempting to short right away.
But, you know what they say, patience is a virtue.
It’d be better to wait for Stochastic to make a downward crossover as confirmation that the pair is indeed headed down.
A couple of candles later, the Stochastic did make that crossover.
Playing that bearish divergence would’ve been fantastic!
What’s the main point here? Just be patient!
Don’t try to jump the gun because you don’t quite know when the momentum will shift!
If you aren’t patient, you might just get burned as one side keeps dominating!