Step by step
How to read it
- 1Price makes a higher high.
- 2The RSI makes a LOWER high at the same time.
- 3Momentum was fading and price turned. Divergence warns — it does not time the turn.
Watch out
Common mistake
Selling every divergence. In a strong trend it can appear again and again while price keeps rising.
In one line
Definition
Price makes a new high (or low) while an oscillator such as the RSI does not — a sign that momentum is fading.
Check yourself
Check yourself
Price makes a new low, the RSI makes a higher low. This is…