Trading Strategies for Advanced Divergence

Hello everyone, How are you doing, I welcome you again to my blog in the Steem Alliance community.

Today, we will discuss an interesting topic on the platform which will be: Trading Strategies for Advanced Divergence

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• Introduction

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In technical analysis, divergence analysis is also one of the powerful methods for identifying potential market trends, reversals, and continuations, Studying advanced divergence helps traders to make a clear entry or exit in the market by having the right information and avoiding the noises.

In this article, we are going to discuss different types of diverges, tools for identifying them, and advanced divergence-based trading strategies.

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Different Types of Divergence

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1 . Divergence we see on a Regular Basis:

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Bullish DivergenceThis sort of divergence usually occurs when the momentum indicator, for example, the RSI or MACD, makes higher lows while the market is actually printing highs, this sort of indicates that bearish momentum is coming and there may be a reversal to the bottom once more.

Bearish Divergence - This type of divergence usually occurs when the momentum indicator makes lower highs while the market price is actually making higher highs, this also kind of indicates that a bullish momentum is coming up and that there may be a downward reversal anytime soon.

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2. Hidden Divergence

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Bullish Hidden Divergence - Just like the name implies, the bullish hidden divergence usually occurs when the RSI indicator makes lower lows while the price makes higher lows, and this indicates that the uptrend movement is likely to continue and that there is a lot of bullish momentum.

Bearish Hidden Divergence - Just like the name implies, as well the bearish hidden divergence usually occurs when the RSI indicator makes higher lows while the price makes lower lows, and this indicates that the downtrend movement is likely to continue and that there is a lot of bearish momentum incoming just as we have seen in the image below.

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Ways on How to Identify Divergences

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By Using RSI (Relative Strength Index): - The change in price movements can be easily measured using the RSI, It is normally used to spot divergences and overbought or oversold conditions.

By Using Moving Average Convergence Divergence(MACD): - A MACD line is useful for spotting divergences because it helps to identify any changes in the strength, direction, and momentum of a trend i.e. the weakness or strength of a trend.

By Using Stochastic Oscillator: - The Stochastic Oscillator compares the buying and the selling price over a period of time, It mostly helps identify divergences in conditions of oversold and overbought market.

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Advanced Divergences-Based Trading Strategies

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Confirming with multiple indicators: - To confirm divergences, you can also make use of multiple momentum indicators like the one I mentioned above, for instance, if the market signal for a potential upward and we witness a reversal in both the RSI and MACD that shows a bullish divergence.

Differences In Trendlines: - On the momentum indicator and the price chart, draw trendlines, and search for divergences where the price breaks the trendline and the indicator signals a different movement, this likely indicates a good reversal.

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Conclusion

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In this article, we have successfully analyzed the basis for Trading strategies using advanced divergences, and its importance in identifying potential market reversals and continuations, this is useful in a way that it can help traders improve in their technical analysis and by looking further into the market beyond the patterns and this are best used with tools like the RSI, MACD, Stochastic Oscillator.

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^{' NB: This post concerns education, not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your research and consult a financial advisor}

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