Divergence
| Divergence is a term used in technical analysis that refers to a discrepancy between an asset’s price and a technical indicator. In other words, when the price of an asset moves in one direction and the indicator moves in the opposite direction, this is called divergence. Divergence can be used to identify potential reversals in the market, as it often signals that the current trend is losing momentum. There are two main types of divergence – bullish and bearish. Bullish divergence occurs when the price of an asset is making lower lows, but the indicator is making higher lows. This is seen as a bullish signal, as it suggests that the current downtrend may be coming to an end. Bearish divergence occurs when the price of an asset is making higher highs, but the indicator is making lower highs. This is seen as a bearish signal, as it suggests that the current uptrend may be coming to an end. Divergence is not a guaranteed indicator of a reversal, but it can be a helpful tool for identifying potential turning points in the market. |
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