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Divergence

Price makes a new extreme, the indicator does not: the move is weakening.

Divergence is a disagreement between the direction of price and of an oscillator. Price prints a new high while RSI or MACD sits lower than at the previous one: the move continues but with less force. It is an early sign a trend is running out, not an instruction to trade: a strong trend produces three or four in a row and the first ones take your stop. It becomes workable together with a level, a range boundary or a break of structure.

Other lessons in this track

Divergence — what it means in trading — VVozny.com