Courses › From Zero to Trader: The Ultimate Starter Guide
Trading Divergences
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What this lesson covers
Divergence is what you see when price makes a new high or low but momentum does not follow, and it is one of the few early signs that a move is running out of participants. This lesson explains what causes it and how to read it properly. Regular divergence, which warns of a possible reversal, is separated clearly from hidden divergence, which suggests a trend is likely to continue after a pullback. The lesson shows how to spot both using RSI, MACD and Stochastic, and why the indicator you choose matters less than the structure around the signal. Most importantly it covers confirmation, since divergence on its own produces a great many false signals, and gives a structured process for filtering them out before risking anything.