Divergence
Price makes a new high/low but indicator (RSI/MACD) does not — early reversal signal.
Divergence occurs when price action and a momentum indicator (RSI or MACD) disagree. Bullish divergence: price makes a lower low, RSI makes a higher low → buyers gaining strength even as price drops. Bearish divergence: price makes a higher high, RSI makes a lower high → sellers stepping in.
Divergence is an EARLY warning, not an entry trigger. The reversal it predicts can take many candles to manifest. Wait for a confirmation candle (bullish/bearish engulfing) AFTER the divergence prints before entering.
Strategies that use Divergence
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