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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.

Divergence Stock Trading using 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



Divergence Stock Trading Terms Definition Examples

Divergence Stock Trading Terms Definition Examples



There are two different types of stocks trading divergence setups:


  1. Classic Divergence

  2. Hidden Divergence

 

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