Divergence

Divergence is a very popular indicator which initally can be difficult to learn however it is worth the effort.

Divergence exists when price action is moving in 1 direction, but the indicator is moving in another direction. In this example of Divergence we will be using the OSMA indicator.

There are 2 major types of divergece - hidden and regular divergence.

Regular Divergence – Predicts the trend is about to END


Higher highs in price action and lower highs in the OSMA indicate a trend reversal from LONG to SHORT.
Lower lows in price action and higher lows in the OSMA indicate a trend reversal from SHORT to LONG.


Hidden Divergence – Predicts trend will CONTINUE

Lower highs in price action and higher highs in the OSMA which indicate the DOWN trend will CONTINUE
Higher lows in price action and lower lows in the OSMA indicate the UP trend will CONTINUE.




Regular bearish divergence                                                       Hidden bearish divergence





                                                                




Regular bullish divergence                                                         Hidden bullish divergence