Indicators
RSI divergence
Price makes a lower low but RSI makes a higher low (bullish divergence), or price a higher high and RSI a lower high (bearish).
Why it works
The move is continuing with less force. Divergences often appear at the end of a trend leg, before a pullback or a reversal.
How to use it
Use divergence as a warning, then wait for a structure break (CHoCH) before trading against the move.
The typical mistake
Trading divergence alone against a strong trend: divergences can repeat several times before price turns.
FAQ
What is Divergence in trading?
Price makes a lower low but RSI makes a higher low (bullish divergence), or price a higher high and RSI a lower high (bearish).
How do you trade Divergence?
Use divergence as a warning, then wait for a structure break (CHoCH) before trading against the move.