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What isdivergence?

Divergence is a popular term in technical analysis that describes when the price of an asset is moving in the opposite direction of a technical indicator.

For instance, if the currency price is moving up, but a technical indicator (e.g. oscillator) is moving in the opposite direction. When it comes to trading divergences, there are two types and each contain either a bullish bias or a bearish bias.

The divergence types are:

Regular divergence

Hidden divergence

RegularBullish Divergence

Regular Bullish Divergence indicates underlying strength. Regular Bullish Divergence occurs as a warning of a potential change of trend direction from a downtrend to an uptrend.

Regular Bearish Divergence

Regular Bearish Divergence indicates underlying weakness. Traders believe that it is a warning of a potential change of trend direction from an uptrend to a downtrend.

 

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