in this video i'm revealing a simple high win rate rsi divergent strategy so without further ado let's get on with the video for this strategy i'm using a combination of three indicators the rsi 200 ema and the stochastics but first the main indicator that i want to focus on is the rsi because that will generate our entry signal for the strategy instead of using the rsi as an overbought and oversold indicator we are instead using it to find hidden divergences so let me give you a quick explanation on what a divergence is during a normal setup if prices are heading in a certain direction usually the indicator will also follow that same direction in this case the price made higher highs and the rsi also made higher highs however there are instances where the indicator is moving in the opposite direction of the price instead like in this example the price made lower highs but the rsi made higher highs this is called a divergence there are two types of divergences a regular divergence and a hidden divergence but for this strategy specifically we are only going to be using hidden divergences a hidden divergence is a type of divergence that signals a possible continuation of an existing trend and there are two types of hidden divergences a bullish hidden divergence which forms when prices are making higher lows but the rsi is making lower lows and a bearish hidden divergence which occurs when prices are making lower highs but rsi is making higher highs so let me show you an example of what a bullish hidden divergence looks like in this chart we spotted an existing uptrend as prices are heading upwards while the rsi is also heading upwards next we can see that the price made a small pullback now if you're looking at this chart with the naked eye you may think that this pullback is signaling a possible trend reversal however if you look at the rsi you can actually spot a bullish hidden divergence as prices made higher lows but the rsi made lower lows this signals a possibility that the uptrend may continue instead and as you can see the hidden divergence predicted the trend continuation perfectly now let's look at an example of what a bearish hidden divergence looks like in this chart we can see that the price is heading downwards while the rsi is also heading downwards then when the price made a pullback to the upside we spotted a bearish hidden divergence as prices made lower highs but the rsi made higher highs this signals a possibility that the downtrend may continue instead and as you can see the hidden divergence predicted the trend continuation perfectly now of course what i just showed you are just ideal examples when you're trading real time spotting these divergences may be a bit hard so that is why i'm going to show you a simple trick that you can use to identify these hidden divergences in real time but first to make the price easier to look at you want to switch your chart to a line chart so the first step is you want to know what kind of divergence are you looking for are you looking for a bullish hidden divergence or a bearish one and the way we determine that is by using the 200 ema so if the price is above the 200 ema you only look for bullish hidden divergences and if the price is below the 200 ema you only look for bearish hidden divergences so for this example let's say that the price is above the 200 ema meaning we only look for bullish hidden divergences and this is how you do it the first step is you want to look at the rsi and identify the latest swing low then you place a horizontal line at the swing low of the rsi and the same swing low of the price next you want to wait for a setup where the rsi crossed below the line but the price hasn't this shows us that the price is still on a higher low but the rsi made a lower low and so this will be our bullish hidden divergence now let's try to find bearish hidden divergences first you want to make sure that the price is below the 200 ema next you want to look at the rsi and identify the latest swing high then you place a horizontal line at the swing high of the rsi and the same swing high of the price next you wait for a setup where the rsi crosses above the line but the price hasn't this shows us that the rsi made a higher high and the price made a lower high and so this will be our bearish hidden divergence now an important rule that you need to remember when trading divergences is you cannot simply take a position just because a divergence appears because it doesn't guarantee that the continuation pattern will form that is why you need to use another indicator to further confirm your analysis and you can do that by using the stochastics and this brings us back to the first part of the video which is the 200 ema rsi and stochastics combination so this is how the strategy works the first step is you want to look at the position of the price in this case it's above the 200 ema meaning we're searching for bullish hidden divergences [Music] however once you've spotted the divergence you don't want to take any positions yet you need the stochastics to further confirm the signal by waiting for it to cross over upwards once this happens you take a buy position let's look at another example in this chart we can see that the price is below the 200 ema meaning we only look for bearish hidden divergences once you've spotted the divergence the next step is we want to further confirm the signal by waiting for the stochastics to cross over downwards once this happens you take a sell position [Music] now for your exit strategy if you took by positions you want to place your stop loss below the nearest swing low and set your profit target at 1.5 times your stop loss and if you took cell positions you want to place your stop loss above the nearest swing high and set your profit target at 1.5 times your stop loss so now let's look at the full strategy in action and again i'm going to switch to a line chart to make the price easier to look at so we can see that the price is above the 200 ema meaning we're looking for bullish hidden divergences and to do that first we want to look at the rsi and identify the nearest swing low next we place a horizontal line at the swing low of the rsi and the same swing low of the price then we want to find a setup where the rsi crosses below the line but the price hasn't and so this will be our hidden divergence the next step is we want to further confirm the signal by waiting for the stochastics to cross over upwards once this happens you take a buy position then you place your stop loss below the nearest swing low and set your profit target at 1.5 times your stop loss and as you can see the price hits our profit target and so this counts as a successful trade let's look at another example in this chart we spotted that the price is below the 200 ema meaning we're looking for bearish hidden divergences so first we want to look at the latest swing high of the rsi and place a horizontal line there and the same swing high of the price then we want to wait for a setup where the rsi crosses above the horizontal line but the price hasn't and so this will be our hidden divergence and again we want to further confirm the signal by waiting for the stochastics to cross over downwards once this happens you take a cell position next you place your stop loss above the nearest swing high and set your profit target at 1.5 times your stop loss and as you can see the price hits our profit target and so this counts as a successful trade so i just revealed to you a simple rsi divergent strategy that you can immediately use right now and all i ask for in return is for you to invest two seconds of your time into liking the video and subscribe to the channel it literally takes only two clicks but it means so much to me and you can also check out my other videos as well so thank you guys for watching and i'll see you in the next video