High School Flashcards
Using divergence trading can be useful in spotting a?
weakening trend or reversal in momentum.
What are TWO types of divergence:
Regular and Hidden.
What is a regular divergence?
A regular divergence is used as a possible sign for a trend reversal.
What are two types of regular divergences:
bullish and bearish.
If price is making lower lows (LL), but the oscillator is making higher lows (HL), this is considered to be?
regular bullish divergence. This normally occurs at the end of a DOWNTREND.
In a Regular Bullish Divergence after establishing a second bottom, if the oscillator fails to make a new low, it is likely that?
the price will rise, as price and momentum are normally expected to move in line with each other.
In a Regular Bearish Divergence f the price is making a higher high (HH), but the oscillator is lower high (LH), then you have?
a regular bearish divergence. This type of divergence can be found in an UPTREND. After price makes that second high, if the oscillator makes a lower high, then you can probably expect price to reverse and drop.
The regular divergence is best used when trying to pick
tops and bottoms.
What’s a hidden divergence?
Hidden bullish divergence happens when price is making a higher low (HL), but the oscillator is showing a lower low (LL). This can be seen when the pair is in an UPTREND.
In a Hidden Bullish Divergence Once price makes a higher low (HL), look and see if the oscillator does the same. If it doesn’t and makes a lower low (LL), then?
we’ve got some hidden divergence in our hands.
What is Hidden Bearish Divergence?
This occurs when price makes a lower high (LH), but the oscillator is making a higher high (HH).
Regular divergences = signal possible?
trend reversal.
Hidden divergences = signal possible?
trend continuation.
In order for divergence to exist, price must have either formed one of the following:
Higher high than the previous high
Lower low than the previous low
Double top
Double bottom
