RSI Indicator Divergence Setups - Bullish Divergence RSI and Bearish Divergence RSI
Forex Divergence is one of the trade setups used by traders. It involves looking at a chart & one more indicator. For our example we shall use the RSI indicator.
To spot this divergence set up find 2 chart points at which price makes a new swing high or a new swing low but the RSI indicator does not, indicating a divergence between price and momentum.
RSI Forex Divergence Example:
In the chart below we spot 2 chart points, point A and point B (swing highs)
Then using RSI indicator we check the highs made by the RSI indicator, these are highs that are directly below the Chart points A and B.
We then draw one line on the chart & another line on the RSI indicator.
RSI Divergence Setup - Forex Divergence Trading using RSI Indicator - Bullish Divergence RSI and Bearish Divergence RSI
How to spot divergence
In order to identify this divergence setup we look for the following:
HH = Higher High - two highs but the last one is higher
LH = Lower High - two highs but the last one is lower
HL = Higher Low - two lows but the last one is higher
LL = Lower Low - two lows but the last one is lower
First let us look at the illustrations of these terms
Divergence Terms - RSI Bullish Divergence vs RSI Bearish Divergence
Forex Divergence Terms Definition Examples - Bullish Divergence and Bearish Divergence RSI
There are 2 types of divergence setups:
- Classic Forex Divergence
- Hidden Trading Divergence