Divergence is when price of an asset moving in the opposite direction of the indicator
Oscillator indicators such as RSI, MACD or stochastic give their best signal when they diverge from the price.
Bullish divergence occurs when price makes new lows but Oscillators refuse to make new lows which sometimes implies that the downtrend is about to end.
Bearish divergence, on the other hand, occurs at market tops. Prices make new highs while Oscillator refuses to make new peaks.
Both bullish and bearish divergences are divided into three classes: Class A, B and C
In bullish divergence, class A divergence is considered as the strongest buy signal while class C send the weakest signal
The same law applies to bearish divergence.
Hope this helps.
Oscillator indicators such as RSI, MACD or stochastic give their best signal when they diverge from the price.
Bullish divergence occurs when price makes new lows but Oscillators refuse to make new lows which sometimes implies that the downtrend is about to end.
Bearish divergence, on the other hand, occurs at market tops. Prices make new highs while Oscillator refuses to make new peaks.
Both bullish and bearish divergences are divided into three classes: Class A, B and C
In bullish divergence, class A divergence is considered as the strongest buy signal while class C send the weakest signal
The same law applies to bearish divergence.
Hope this helps.
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