Divergence trading: summary
Here is a little something to help you fully wrap your head around divergence trading. There are two types of divergences and both of them have very different traits that can help us distinguish trends extension and trend reversal.
I put together a table that is going to help you understand more. If you are eager to study more, you can simply print it out and look at it while you are trading. soon enough you are going to remember all of it.
Bullish divergence has a lower low price, but a higher low oscillator. It indicates underlying strength. Warning of possible reversal from downtrend to uptrend.
Bearish divergence has a higher high price but a lower high oscillator. Indicates underlying weakness. Warning of possible reversal from uptrend to downtrend.
Bullish divergence has a higher low price but a lower low oscillator. Indicates underlying strength. Good entry or re-entry. Occurs during retracements in an uptrend. BUY signal.
Bearish divergence has a lower high price but a higher high oscillator. Indicates underlying weakness. Found during retracements in a downtrend. SELL signal.
And here you go. All of the divergence in one place. I certainly hope that it is going to help you be more successful.
And we are to move to the next topic now!
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