Trade Forex Trading

RSI Indicator Divergence Setups

XAUUSD Divergence is one of the trade setups used by traders. It involves looking at a chart & one more technical indicator. For our example we shall use the RSI indicator.

To spot this divergence set up find two chart points at which price makes a new swing high or a new swing low but the RSI indicator doesn't, indicating a divergence between price & momentum.

RSI Divergence Example:

In the chart below we identify two chart points, point A and point B (swing highs)

Then using RSI indicator we check the highs made by the RSI technical indicator, these are the highs that are directly below the Chart points A & B.

We then draw one line on the chart & another line on the RSI indicator.

RSI Divergence Strategies - RSI Indicator Divergence Analysis

RSI Divergence Setup - XAUUSD Divergence XAUUSD using RSI Technical Indicator

How to spot divergence

In order to identify this divergence setup we look for the following:

HH=Higher High- 2 highs but the last one is higher

LH= Lower High- 2 highs but the last one is lower

HL=Higher Low- 2 lows but the last one is higher

LL= Lower Low- 2 lows but the last one is lower

First let us look at the illustrations of these terms

Divergence Terms Definition - Divergence Meaning

Divergence Terms Definition

RSI Indicator Divergence: How to Spot RSI Divergence in XAUUSD - RSI Divergence Strategies

XAUUSD Divergence Terms Definition Examples

There are two types of divergence setups:

  1. Classic Divergence
  2. Hidden Divergence