Divergence Detection
Last updated
Last updated
The Divergence Detection feature enhances the oscillator’s predictive capabilities by identifying areas where momentum diverges from price movement, which often signals reversals:
Normal Bearish and Normal Bullish divergences show when momentum weakens against the current trend direction, hinting at potential trend reversals.
In a normal bearish divergence, price makes a higher high while the oscillator makes a lower high, suggesting that bullish momentum is weakening, which could precede a downward reversal.
Conversely, a normal bullish divergence occurs when price makes a lower low, but the oscillator makes a higher low, signaling a potential upward reversal. Traders can use these divergences to anticipate reversals and adjust positions accordingly.
Hidden Bearish and Hidden Bullish divergences suggest trend continuation, revealing underlying strength in the current trend despite minor pullbacks or rallies.
A hidden bullish divergence occurs when price makes a higher low but the oscillator makes a higher low, suggesting the uptrend is likely to continue.
Similarly, a hidden bearish divergence suggests the downtrend will continue if the oscillator shows a lower high while price makes a lower high, confirming downward strength.
Traders can use hidden divergences to confirm that a trend remains strong and look for entries aligned with the current trend.
