![]() ![]() When your indicator and price action are out of sync it means that “something” is happening on your charts that require your attention and it’s not as obvious by just looking at your price charts.īasically, a divergence exists when your indicator does not “agree” with price action. You’d be surprised how many people get this wrong already.Ī divergence forms on your chart when price makes a higher high, but the indicator you are using makes a lower high. Let’s start with the most obvious question and explore what a divergence really is and what it tells you about price. I do not recommend trading divergences by themselves but they are a good starting point. In my own trading strategy, divergences are a big part for one of my setups and in combination with other signals. Divergences can not only be used by reversal traders but also trend-following traders can use divergences to time their exits. Divergences are one of my favorite trading concepts because they offer very reliable high-quality trading signals when combined with other trading tools and concepts.Īlthough indicators are somewhat lagging – just like price action is lagging too – when it comes to divergences, this lagging feature is actually going to help us find better and more reliable trade entries as we will see below. ![]()
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September 2023
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