Stocks Divergence Definition

Divergence trading concept is a concept where a trader will for a difference between the stocks price movement with the movement of a technical trading technical indicator. For our example we shall use the RSI indicator to explain divergence trading.

RSI indicator is one of the commonly used divergence trading indicator. This stocks indicator is an oscillator similar to the RSI & it can be used to trade divergence setups just the same way as the RSI indicator.

RSI Stock Technical Analysis & RSI Stocks Signals

RSI Divergence Indicator

RSI Bullish Stocks Trading Divergence Setups

Classic RSI Bullish Stock Trading Divergence Setup

RSI classic bullish divergence occurs when price is making lower lows ( LL ), but the RSI technical trading indicator is making higher lows ( HL ).

Stocks Classic Bullish Divergence - RSI Stocks Divergence Definition

RSI classic bullish divergence warns of a possible change in the stocks trend from down to up. This is because even though the stocks price went lower the volume of sellers that pushed the stocks price lower was less as illustrated by the RSI technical indicator. This is an technical indicator of the underlying weakness of the downwards trend.

Hidden RSI Bullish Stocks Trading Divergence Setup

Forms when price is making a higher low ( HL ), but the RSI technical trading indicator is showing a lower low ( LL ).

RSI hidden bullish divergence occurs when there is a retracement in an upwards stock trend.

Stocks Hidden Bullish Divergence - RSI Stocks Divergence Definition

This setup confirms that a retracement move is complete. This RSI divergence setup indicates underlying strength of an upward stock trend.

RSI Bearish Stock Trading Divergence

Hidden RSI Bearish Stock Trading Divergence Setup

Forms when price is making a lower high ( LH ), but the oscillator technical indicator is showing a higher high ( HH ).

Hidden bearish divergence occurs when there is a retracement in a downward trend.

Stocks Hidden Bearish Divergence - RSI Stocks Divergence Definition

This setup confirms that a retracement move is complete. This divergence indicates underlying strength of a downwards stock trend.

RSI Classic bearish Stocks Trading Divergence Setup

RSI classic bearish divergence occurs when price is making a higher high ( HH ), but the RSI technical trading indicator is making lower high ( LH ).

Stocks Classic Bearish Divergence - RSI Stocks Divergence Definition

RSI Classic bearish divergence warns of a possible change in stocks trend from up to down. This is because even though the stocks price went higher the volume of buyers who pushed the stocks price higher was less as illustrated and shown by the RSI trading technical indicator. This is an technical indicator of the underlying weakness of the upwards trend.