Divergence Trading Strategies
Identify hidden weaknesses in market trends. Learn how to spot bullish and bearish divergences using momentum oscillators to predict major market reversals.
What is a Divergence?
play_circle Institutional Divergence Trading Masterclass
Strategic Briefing: Professional guide to identifying and trading regular and hidden divergences in crypto markets.
A divergence occurs when the price of an asset moves in the opposite direction of a technical indicator, typically a momentum oscillator like the RSI or MACD. It serves as a leading indicator, warning traders that the current trend is losing its underlying strength.
Bearish and Bullish Divergences
- Regular Bullish Divergence: Price makes a lower low, but the oscillator makes a higher low. This indicates that despite the new low, downward momentum is fading, signaling a potential bullish reversal.
- Regular Bearish Divergence: Price makes a higher high, but the oscillator makes a lower high. The upward momentum is exhausted, warning of an impending top and correction.
Hidden Divergences
While regular divergences signal trend reversals, hidden divergences signal trend continuation. A hidden bullish divergence occurs when price makes a higher low, but the oscillator makes a lower low, suggesting the asset is gathering momentum for the next leg up.
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