Hello everyone,

I summarized an article about divergences – what they are, the major types, how to identify them, and how to use them in conjunction with a trading strategy.

I received some messages from users asking for examples, so I decided to add some examples and additional information about divergences.

**1. Bullish Divergence**


Price is making a lower low while the technical indicator shows higher lows. This signalizes a weakening momentum of a downtrend and a reversal to the upside can be expected to follow.

Quick Notes: watching troughs in a downtrend, the indicator moves up first


**2. Bearish Divergence**


Price is creating higher highs while the technical indicator shows lower highs. This signalizes that momentum to the upside is weakening and a reversal to the downside can be expected to follow.

Quick Notes: watching peaks in an uptrend, the indicator moves down first


**3. Hidden Bullish Divergence**


Price is making higher lows while the oscillator makes lower lows. A hidden bullish divergence can signalize that uptrend will continue and can be found at the tail end of a price throwback (retracement down).

Quick Notes: watching troughs in an uptrend drawback, price moves up first



**4. Hidden Bearish Divergence**



Price is making lower highs while the oscillator makes higher highs. A hidden bearish divergence can signalize that downtrend will continue and can be found at the tail end of a price pullback (retracement up).

Quick Notes: watching peaks in a downtrend drawback, price moves down first



**Regular divergences = a reversal signal**

They indicate that the momentum of the trend has weakened -> an early warning of a potential change in direction.

Look for them in areas where trend can change. Strong S/R levels, long high-timeframe moving averages (e.g. Daily 200 EMA) areas etc.

**Hidden divergences = a trend continuation signal**

They indicate that the current trend is likely to continue after a pullback/throwback.

Look for them in pullbacks/throwbacks of trends but also seek strong confluence to jump into the trend!

**Validity of the Divergence**

Divergence is usually used with a momentum indicator, like RSI, Awesome oscillator, or MACD. These indicators look at current momentum, so trying to find divergence from 100+ candles ago does not have any predictive value.

However, changing the indicator’s period influences the look-back range for a valid divergence. Always use discretion when determining the validity of the divergence.



Divergences can be an important tool for traders to add to their arsenal if they are used in a careful and strategic manner.

It is always important to use divergences in conjunction with other forms of technical or fundamental analysis.

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1 Comment

  1. Wandersportx on 4. April 2024 at 23:45

    Thanks man