Master the "Reversal Blueprint." Learn how price-momentum decoupling reveals hidden market exhaustion before it becomes obvious to the rest of the market.
Divergence occurs when the price action of an asset moves in the opposite direction of a technical indicator (typically an oscillator like the RSI or MACD). In a healthy trend, price and momentum should move in tandem. When they decouple, it is a powerful warning sign that the current trend is exhausting itself.
Regular divergence is identified when:
The RSI, MACD, and Stochastic oscillators are the industry standards for spotting divergence. Choose one and master it; don't clutter your chart with all three.
No. Divergence is a "warning sign." It tells you to start looking for a reversal, but you should wait for a clear confirmation (like a break of market structure or a candlestick pattern) before entering a trade.