Divergence

Understanding Divergence

• Divergence is a critical concept in trading that occurs when the price of an asset moves in opposition to a technical indicator, usually an oscillator.
• This situation can signal that the current trend may be weakening. 📉
• It helps traders identify potential reversal points in the market.

Types of Divergence

• Regular Bullish Divergence: Price makes lower lows while the oscillator makes higher lows.
• Regular Bearish Divergence: Price forms higher highs while the oscillator creates lower highs.
• Hidden Bullish Divergence: Price shows higher lows but the oscillator indicates lower lows.
• Hidden Bearish Divergence: Price forms lower highs while the oscillator shows higher highs.

Knoxville Divergence Indicator

• This powerful tool combines the Relative Strength Index (RSI) with a momentum oscillator.
• It detects divergences, helping traders find lucrative entry and exit points in the market.
• Visual signals appear on the price chart when divergences are identified, making it user-friendly. 📊

Practical Application

• For example, if the EUR/USD pair is in an uptrend, but the Knoxville Divergence indicator shows a divergence signal, this could point to a potential trend reversal.
• Successful confirmation requires analyzing other indicators and candlestick patterns.
• Traders can look for falling momentum with a rising price, confirming the divergence trend. 📈

Tools for Divergence Detection

• Indicators like Divergence Force and KT CCI Divergence provide robust detection methods for both regular and hidden divergences.
• The KT OBV Divergence focuses specifically on divergences within the On Balance Volume oscillator, adding more depth to analysis.