RSI Stock Indicator Divergence Stock Trading Setups
Stock Divergence is one of the trade setups used by Stock traders. It involves looking at a stock chart and one more stock technical indicator. For our example we shall use the RSI stock indicator.
To spot this stocks trading divergence trading setup find two stock chart points at which stocks price makes a new swing high or a new swing low but the RSI stock indicator does not, indicating a divergence between stocks price and momentum.
RSI Stock Divergence Example:
In the stock chart below we identify two stock chart points, point A and point B (swing highs)
Then using RSI stock indicator we check the highs made by the stock trading RSI indicator, these are the highs that are directly below the stock trading Chart points A and B.
We then draw one line on the stock chart and another line on the RSI stock indicator.
RSI Divergence Stock Trading Setup - Divergence Stock Trading using RSI Stocks Trading Indicator
How to spot stock trading divergence
In order to spot this stocks trading divergence setup we look for the 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
First let us look at the illustrations of these stock trading terms
Divergence Stock Trading Terms Definition
Divergence Stock Trading Terms Definition Examples
There are two different types of stocks trading divergence setups:
- Classic Divergence
- Hidden Divergence