Hey folks, been refining my approach to using RSI divergence for altcoin entries, especially in this choppy market. I've noticed a lot of success by combining it with other indicators, rather than relying on it solely.
My core strategy involves looking for bullish divergence on the 1-hour or 4-hour RSI. This means the price makes a lower low, but the RSI makes a higher low. However, I found that just jumping in on the first sign of divergence often leads to premature entries or getting caught in fakeouts.
To filter these, I now wait for a confirmation signal. My preferred confirmations are:
- A break above a short-term resistance level on the price chart.
- A bullish crossover on the MACD (Moving Average Convergence Divergence).
- Volume increase on the confirmation candle.
I also pay close attention to the overall market sentiment and Bitcoin's price action. If BTC is dumping hard, even strong altcoin divergence might not hold. It's crucial to manage risk, so I always set my stop-loss below the recent low or a significant support level.
For example, I recently entered a position on $LINK when I saw a clear bullish divergence on the 4H RSI. Price made a lower low around $12, but RSI ticked up. I waited for price to break above the $13 resistance and saw the MACD cross bullishly. Placed my stop just below $11.50. It worked out well, giving me a nice ~20% gain before I took partial profits.
What are your experiences with RSI divergence? Any other indicators or confirmations you find essential? Looking to improve this strategy further.