RSI Classic Bullish Divergence & Classic Bearish Divergence Trade Setups
Forex classic divergence pattern is used by traders as a possible sign for a trend reversal. Classic divergence is used when looking for an area where forex price could reverse and begin going in the opposite market direction. For this reason forex classic divergence is used as a low risk entry method and also as an accurate way of exit out of a trade.
- Classic divergence is a low risk method to sell near the top or buy near the bottom of a market trend, this makes the risk on your trade transactions are small in relation to potential reward.
- Classic divergence is used to predict the optimum point at which to exit a trade
There are 2 types of RSI Classic divergence setups:
- Classic Bullish Divergence Setup
- Classic Bearish Divergence Setup
Classic Forex Bullish Divergence
Classic forex bullish divergence occurs when price is making lower lows (LL), but the oscillator indicator is making higher lows ( HL ).
Classic Forex Bullish Divergence - RSI Strategies
Classic bullish forex divergence warns of a possible change in the market trend from downward to upward. This is because even though price moved lower the volume of sellers that moved price lower was less as illustrated by RSI indicator. This indicates underlying weakness of the downward forex trend.
Classic Forex bearish divergence
Classic forex bearish divergence occurs when price is making a higher high (HH), but the oscillator indicator is lower high ( LH ).
Classic Bearish Divergence Trading with RSI Indicator Strategies
Classic forex bearish divergence warns of a possible change in the trend from upward to downward. This is because even though price moved higher the volume of buyers that moved price higher was less as illustrated by RSI indicator. This indicates underlying weakness of the upward trend.
