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 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
XAUUSD Divergence Terms Definition Examples
There are two types of divergence setups:
- Classic Divergence
- Hidden Divergence