Henry338 Sanchez

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What is divergence in forex trading?

Divergence occurs when the price of a currency pair moves in the opposite direction of an indicator such as RSI or MACD. For example, if price makes higher highs but RSI makes lower highs, it signals bearish divergence and potential reversal. Conversely, bullish divergence occurs when price makes lower lows but the indicator makes higher lows. Divergence highlights weakening momentum and is used to anticipate turning points. While it is a powerful tool, divergence can persist for a while before reversal happens. Traders often combine divergence signals with support and resistance or trendlines for confirmation before entering trades.