Trade Stock Indices

RSI Indicator Divergence Setups

Indices Divergence is one of the trade transaction setups used by the traders. It involves looking at a chart and one more indicator. For our example we shall use RSI technical indicator.

To identify this divergence trade setup find two stock chart points at which price makes and forms a new swing high or a new swing low but the RSI doesn't, indicating a divergence between trading price & momentum.

RSI Divergence Example:

In the trading chart below we identify two stock chart points, point A & point B (swing highs)

Then using RSI we check and analyze highs made and formed by the trading RSI, these are highs that are directly below the Chart points A & B.

We then plot one line on the chart & another line on the RSI.

RSI Divergence Setup - RSI Divergence Index Strategies - RSI Stock Divergence Cheat Sheet

RSI Divergence Trading Setup - Divergence Trading using RSI Indicator

How to identify a divergence

In order to identify this stock trade divergence trade setup we check for the following:

HH = Higher High - 2 highs but the last is higher

LH = Lower High : two highs but last is lower

HL = Higher Low : 2 lows but last is higher

LL = Lower Low - 2 lows but last is lower

First let us look at the explanations of these trading terms

Divergence Terms Definition - RSI Divergence Stock Strategies

Divergence Terms Meaning

RSI Indicator Divergence: How to Spot RSI Divergence Index Trade

Divergence Terms Definition Example

There are 2 types of stock trade divergence setups:

  1. Classic Trading Divergence
  2. Hidden Trading Divergence Trading Setup

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