What's Divergence?

What's Divergence Indices Definition? - Divergence is a stock trading setup used by traders -divergence involves looking at a chart and a indicator - for example MACD indicator.

To find this divergence trading setup find two chart points which price makes a new swing high or a new swing low but the MACD technical indicator does not do the same, this trading signals a divergence between stock price & MACD indicator momentum.

For a divergence stock trading setup we look for 2 chart points, two highs that form an M-shape on stock chart or two lows that form a WShape on stock chart. Then look for the same M-shape or WShape on Indices MACD indicator.

Example of a Stock Indices Divergence Trade Setup:

In the stock chart below we spot two chart points, point A & point B (swing highs). These 2 chart points form an M-shape on trading stock price chart.

Then using indices MACD technical indicator we check the highs made by the MACD indicator, these are highs that are direct below Chart points marked A and B.

We then draw one line on the stock chart & another line on the MACD technical indicator.

Divergence Indices Signals - What's Divergence Stock Indices Meaning? - What's Divergence Indices Definition?

The chart above displays example of hidden bearish divergence.

What is Divergence Indices Trading?

In order to trade Stock Indices divergence signal we look for following:

• HH : Higher High - two highs but the last one is higher
• LH : Lower High - two highs but the last one is lower
• HL : Higher Low - two lows but the last one is higher
• LL : Lower Low - two lows but the last one is lower

Divergence Indices Terms Definition: What's Divergence Indices Trading? - What's Divergence?

M shapes on Stock Indices charts dealing with price Highs

W Shapes on Stock Indices charts dealing with price lows

Example of M Shapes on Stock Indices Charts - What's Bearish Divergence?

Examples of W Shapes on Indices Charts - What's Bearish Divergence?

What's Divergence Indices Trading? - What's Divergence? - What's Bullish Divergence? - What is Divergence Stock Indices Meaning? - What's Divergence Indices Definition?