Divergence is a technical analysis indicator that can be used to identify potential changes in the trend of security. Divergence occurs when the price of a security and an oscillator move in opposite directions.
There are two types of divergence: bullish divergence and bearish divergence. A bullish divergence occurs when the price of a security is making lower lows, but the oscillator is making higher lows. This indicates that the underlying trend may be weakening and that a reversal may be imminent.
A bearish divergence occurs when the price of a security is making higher highs, but the oscillator is making lower highs. This indicates that the underlying trend may be weakening and that a reversal may be imminent.
Spotting divergence with oscillators on TradingView
You can spot divergence with oscillators on TradingView by using the platform’s built-in oscillators. Some of the most popular oscillators on TradingView include:
Relative Strength Index (RSI)
Stochastic Oscillator
Moving Average Convergence Divergence (MACD)
To spot divergence with oscillators on TradingView, you can follow these steps:
Select the oscillator that you want to use.
Add the oscillator to your chart.
Identify the trend of security.
Look for divergence between the price of the security and the oscillator.
If you see divergence, it is a signal that the underlying trend may be weakening and that a reversal may be imminent. However, it is important to remember that divergence is not always a reliable indicator. It is important to use divergence in conjunction with other technical analysis indicators to confirm the signal.
Wait for confirmation: Divergence is not always a reliable signal. It is important to wait for confirmation before entering a trade. Confirmation can come in the form of a break of the trend line, a reversal pattern, or a change in the momentum of the security.
Use divergence with other trading strategies: Divergence can be used in conjunction with other trading strategies to increase your chances of success. For example, you could use divergence to identify potential entry points for a trend reversal trade.
Be patient: Divergence does not always lead to a reversal. It is important to be patient and wait for the signal to be confirmed before entering a trade.
Here are some additional oscillators that you can use to spot divergence on TradingView:
Williams %R
Commodity Channel Index (CCI)
Relative Strength Index (StochRSI)
Divergence is a technical analysis indicator that can be used to identify potential changes in the trend of a security. By spotting divergence with oscillators on TradingView, you can increase your chances of trading successfully.
Here are some additional tips for spotting divergence with oscillators on TradingView:
Use a variety of oscillators: No single oscillator is perfect. By using a variety of oscillators, you can increase your chances of spotting divergence.
Look for divergence on multiple timeframes: Divergence can occur on different timeframes. By looking for divergence on multiple timeframes, you can increase your chances of spotting a reliable signal.
Use divergence in conjunction with other technical analysis indicators: Divergence is not always a reliable indicator. It is important to use divergence in conjunction with other technical analysis indicators to confirm the signal.