Trade Forex Trading

RSI Divergence Setups - Identifying Bullish and Bearish Divergence RSI

FX Divergence is a trade setup used by traders. It means looking at both a chart and another indicator. We'll use the RSI indicator as our example.

To identify divergence setups, locate two chart points where the price forms a new swing high or swing low, but the RSI does not follow suit. This disparity between price and momentum indicates a divergence.

RSI Forex Divergence Example:

In the chart below we identify 2 points, point A and point B (swing highs)

Then, using RSI, we look at the highs created by the RSI indicator: these highs are right below the points labeled A and B on the chart.

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

RSI Divergence Setup - Comparing Bullish Divergence RSI with Bearish Divergence RSI

RSI Divergence Trading Setup: Executing Forex Divergence Trades using RSI, encompassing both Bullish RSI Divergence and Bearish RSI Divergence.

How to identify divergence setup

To identify this divergence trading setup, we need to look for the following signs:

HH = Higher High - two 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 - two lows but the last one is lower

First let us look at the explanations of these trading terms

Definition of Divergence Terms - Bearish and Bullish RSI Divergence

Divergence Terms - RSI Bullish Divergence vs RSI Bearish Divergence

Forex Divergence Basics - Bullish and Bearish RSI Divergence Examples

FX Divergence Terms Definition Examples - Bullish Divergence and Bearish Divergence RSI

There are 2 types of divergence setups:

  1. Classic Forex Divergence
  2. Hidden Divergence Setup

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