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