RSI Classic Bullish Divergence and Classic Bearish Divergence Trading Setups

Forex classic divergence is used as a possible sign for a trend reversal. Classic divergence trading setup is used when looking for an area where price could reverse and begin going in the opposite direction. For this reason forex classic divergence is used as a low risk entry method and also as an accurate way of exit out of a trade.

• Classic divergence is a low risk method to sell near the top or buy near the bottom of a market trend, this makes the risk on your trades are very small relative to the potential reward.

• Classic divergence is used to predict the optimum point at which to exit a FX trade

There are 2 types of RSI Classic divergence trading setups:

1. Classic Bullish Divergence Setup
2. Classic Bearish Divergence Setup

Classic Bullish Divergence

Classic bullish divergence occurs when price is making lower lows (LL), but the oscillator technical indicator is forming higher lows ( HL ).

Classic Bullish Divergence - RSI Strategies Methods

Classic bullish divergence warns of a possible change in the market trend from down to up. This is because even though the price went lower the volume of sellers who pushed the price lower was less as illustrated by the RSI indicator. This indicates underlying weakness of the down ward trend.

Classic bearish divergence

Classic bearish divergence occurs when price is making a higher high (HH), but the oscillator technical indicator is showing a lower high ( LH ).

Classic Bearish Divergence Trading with RSI Indicator Forex Strategies Methods

Classic bearish divergence warns of a possible change in the trend from up to down. This is because even though the price went higher the volume of buyers that pushed the price higher was less as illustrated by the RSI indicator. This indicates underlying weakness of the upwards trend.