RSI Indicator Divergence Trade Setups
Divergence is one of the trade set-ups used by traders. It involves looking at a chart & one more technical indicator. For our example we shall use the RSI.
To spot this xauusd divergence trading set up find two chart points at which xauusd price makes a new swing high or a new swing low but the RSI indicator does not, indicating a divergence between xauusd price and momentum.
RSI Divergence Example:
In the chart below we identify two points, point A and point B (swing highs)
Then using RSI indicator we check the highs made by the trading RSI, these are the highs that are directly below the Chart points A and B.
We then draw one line on the chart and another line on the RSI indicator.
RSI Divergence Setup - Trade Divergence using RSI Indicator
How to spot trade divergence
In order to spot this xauusd trade divergence setup we look for the following:
HH = Higher High - 2 highs but the last is higher
LH = Lower High : 2 highs but last one is lower
HL = Higher Low : two lows but the last is higher
LL = Lower Low : 2 lows but last one is lower
First let us look at the illustrations of these trading terms
Divergence Terms Definition
Trade Divergence Terms Definition Example
There are two different types of trade divergence setups:
- Classic Divergence
- Hidden Divergence Setup
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