Divergence
Divergence is when price and an indicator move in opposite directions - a warning that the move is losing momentum.
Divergence is price making a new high or low while an oscillator fails to confirm it. It warns of fading momentum but needs price confirmation before it is tradeable.
Divergence occurs when price makes a new high or low but an oscillator like RSI or MACD fails to confirm it. Bullish divergence (price lower low, indicator higher low) warns of weakening selling pressure; bearish divergence warns of weakening buying. Divergence is a warning, not a signal on its own - momentum can stay divergent for a long time in strong trends, and divergences resolve only when price confirms by breaking the relevant structure.
How It Works
- Compare price swings against RSI, MACD or momentum readings
- Bullish divergence: lower price low with higher indicator low
- Bearish divergence: higher price high with lower indicator high
Trading Tips
Wait for price to break the trendline or swing level before acting on divergence
Divergence in overbought/oversold territory is more reliable
In strong trends, divergence can warn early and stay wrong for weeks - respect the trend
Related Terms
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