RSI Stock Index Classic Bullish Divergence & Classic Bearish Divergence Setups
Stock Index classic divergence is used as a possible sign for a trend reversal. Classic divergence setup is used when looking for an area where price could reverse & begin going in the opposite direction. For this reason forex classic divergence is used as a low risk entry method & also as an accurate way of exit out of a trade.
- Classic divergence is a low risk method to sell near the top or buy near the bottom of a market trend, this makes the risk on your Stock Indices trades are very small relative to the potential reward.
- Classic divergence is used to predict the optimum point at which to exit a trade
There are two types of RSI Classic divergence setups:
- Classic Bullish Divergence Setup
- Classic Bearish Divergence Setup
Classic Bullish Divergence
Classic Stock Indices bullish divergence occurs when the price is making lower lows (LL), but the oscillator is making higher lows (HL).
Classic Bullish Divergence - RSI Strategies
Classic bullish divergence setup warns of a possible change in the market trend from downwards to upwards. This is because even though the market price went lower the volume of the sellers who pushed the price lower was less as illustrated by the RSI indicator. This indicates underlying weakness of the downwards trend.
Classic Bearish Divergence
Classic bearish divergence occurs when price is making a higher high (HH), but the oscillator is lower high (LH).
Classic Bearish Divergence Trading with RSI Indicator Indices Strategies
Classic bearish divergence setup warns of a possible change in the trend from upwards to downwards. This is because even though the market price went higher the volume of the buyers who pushed the price higher was less as illustrated by the RSI indicator. This indicates underlying weakness of the upwards trend.
