RSI Index Classic Bullish Divergence and Classic Bearish Divergence Setups

Stock Index classic divergence is used as a possible sign for a trend reversal. Classic divergence trading setup is used when looking and searching for an area where price could reverse and begin and start going in the opposite market direction. For this reason classic divergence setup is used as a low risk entry method & also as an accurate way to exit of a trade.

• Classic divergence is a low risk method to open sell near the top or buy near the bottom of a trend, this makes the risk in your Index trades are very small relative to the potential reward.

• Classic divergence setup is used to predict the optimum ideal point at which to exit a trade

There are 2 types of RSI Classic divergence trading patterns:

1. Classic Bullish Divergence Trading Setup
2. Classic Bearish Divergence Setup

Classic Bullish Divergence

Classic Index bullish divergence setup occurs when the price is making/forming lower lows (LL), but the oscillator trading is making/forming higher lows (HL).

Classic Bullish Divergence - RSI Strategies

Classic bullish divergence trading pattern warns of a possible change in the trend from downward to upward. This is because even though the market price went lower the volume of the sellers(bears) who pushed the price lower was less like is shown by the RSI indicator. This shows underlying weakness of the downward trend.

Classic Bearish Divergence

Classic bearish divergence setup occurs when price is making/forming a higher high (HH), but the oscillator is lower high (LH).

Classic Bearish Divergence Trade with RSI Stock Indices Trade Strategies

Classic bearish divergence trading setup warns of a possible change in the trend from upward to downward. This is because even though the market price went higher the volume of the buyers(bulls) who pushed the price higher was less like shown by the RSI indicator. This shows underlying weakness of the upward trend.

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