RSI Indicator Divergence Setups

Divergence in indices is a trading setup utilized by traders. It entails analyzing a chart along with an additional indicator. We will utilize the RSI technical indicator for our example.

Spot divergence by finding chart points with new price highs or lows. The RSI fails to match, showing a split between price and momentum.

RSI Divergence Example:

On this chart, we mark two highs: point A and point B.

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 Trading Setup - Divergence Trading using RSI Indicator

How to identify a divergence

To identify this stock trade divergence setup, we must check for the following criteria:

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 Meaning

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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