First of all the word divergence means to separate, In technical analysis, divergence is a situation where price and indicator move in opposite directions, such as prices rising while the indicator is falling. Divergence is considered either positive (bullish) or negative (bearish); both kinds of divergence signal major shifts in price direction. Positive/bullish divergence occurs when the price of a security makes a new low while the momentum indicator starts to climb upward. Negative/bearish divergence happens when the price of the security makes a new high, but the indicator fails to do the same and instead moves lower. Divergences frequently occur in extended price moves and frequently resolve with the price reversing direction to follow the momentum indicator.
Divergence is used spot potential market reversals by comparing an indicator with market direction. Below is a graph that shows a situation where price and indicator move in opposite directions
Divergence is used spot potential market reversals by comparing an indicator with market direction. Below is a graph that shows a situation where price and indicator move in opposite directions
Uses of Divergence in forex
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