RSI Indicator Divergence Trading Setups
Indices Divergence is one of the trade setups used by traders. It involves looking at a Stock Indices trade chart & one more Stock Indices technical indicator. For our example we shall use the RSI Indices indicator.
To spot this Stock Indices divergence trading setup find two Stock Indices trade chart points at which price makes a new swing high or a new swing low but the RSI Indices indicator does not, indicating a divergence between price & momentum.
RSI Indices Divergence Example:
In the Stock Indices trade chart below we identify two Stock Indices trade chart points, point A and point B (swing highs)
Then using RSI Indices indicator we check the highs made by the Stock Indices RSI indicator, these are the highs that are directly below the Stock Indices Trade Chart points A and B.
We then draw one line on the Stock Indices trade chart & another line on the RSI Indices indicator.
RSI Divergence Stock Indices Trading Set Up - Indices Divergence Trading using RSI Indicator
How Do You spot Stock Indices divergence
In order to spot this Stock Indices 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 Stock Indices trading terms
Divergence Stock Indices Trading Terms Definition
Indices Divergence Trading Terms Definition Examples
There are two types of Stock Indices divergence setups:
- Classic Divergence
- Hidden Divergence
