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Indicators

Divergence

Intermediate

Also calledbearish divergencebullish divergencehidden divergence

Price and an oscillator disagreeing: a higher high in price with a lower high in RSI, for example.

What it means

It warns that momentum is fading but doesn't time the turn. Wait for structure to confirm.

Illustrative example, not real market data.

In practice

Divergence shows that the latest push in price had less force behind it than the one before. Traders use it as an alert at levels they already care about: a new high into resistance with a lower RSI reading says the move is tiring.

It is also used to manage trades, for example tightening a stop or taking partial profit when momentum stops confirming new highs.

What to watch for

Strong trends print divergence after divergence while price keeps going. Entering against a trend on divergence alone, with no break in structure, is one of the most common ways to lose money with oscillators.

Entrix Academy

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