Stop Trading Blind: The Divergence Signal Every Trader Should Know

You’re watching your chart, price keeps hitting new highs but something feels off… That’s Divergence whispering to you.

Divergence = Price moves one way, but your indicator (RSI/MACD) moves the opposite. Sounds useless? Actually it’s one of the cleanest reversal signals out there.

The Two Types That Actually Matter

Regular Divergence (The Reversal Play)

• Price keeps climbing → RSI starts dropping. Dead giveaway the uptrend is running out of steam
• Price keeps falling → MACD stops confirming the dump. Could bounce hard
• This screams: “Trend is done, flip to the other side”

Hidden Divergence (The Continuation Play)

• Price pulls back weakly but indicators still act strong. The trend ain’t over
• You see this? Stay in your position. More upside/downside coming

How to Spot It (Real Talk)

1. Find 2 swing highs or 2 swing lows on your chart
2. Check your indicator (RSI <30 is oversold goldmine, >70 is overbought trap)
3. See the mismatch? Price goes higher but RSI goes lower = Bearish Divergence incoming
4. Wait for confirmation - Don’t FOMO in, let price break support/resistance first

The Reality Check

Divergence won’t catch every reversal. Sometimes you get baited 2-3 times before it finally works. That’s why always set stop loss at the previous swing high/low.

TLDR: Divergence = Market’s warning light. Not 100% accurate but catches way more reversals than random guessing. Pair it with support/resistance levels and you’ve got something legit.