Let’s talk about divergence!
Are you looking for a new technique to enhance your trading capabilities?
Divergence is a powerful technique that day traders and swing traders use to find reversals in the market.
Today, I’m going to share with you why I think you should consider using divergence in your trading.
If you have never heard of the term divergence, there’s no reason to worry. My goal for you, by the end of this blog, is to have a clear understanding of what divergence is and why you should start testing this technique out for yourself.
Have you ever found yourself looking at your charts after a terrible day of trading, wishing you knew the market was going to reverse? After all, you could have made money had you known the market was going to reverse. You’re not alone!
After I discovered the power of divergence, I was able to understand more clearly why prices tend to reverse at certain levels and breakthrough other levels.
So let’s break it down, when price makes a low and comes back to retest the level, ideally, a support level, traders use indicators such as MACD or RSI. These indicators confirm whether the market is getting stronger or weaker by analyzing the lows in the indicator.
Once upon a time, I, too, used the MACD and RSI. However, I have since created my own custom divergence indicator that I feel is more accurate than either of these two indicators.
Now, to demonstrate how these indicators work.
If the indicator is making higher lows when the price is testing a support level, then you have an edge that price is likely to trade higher in the short term.
If the indicator is making lower lows when the price is testing a support level, then you have an edge that price is likely to trade lower and break support in the short term.
Are you still confused or uncertain about the value that divergence provides day traders and swing traders?
In the video below, I show you several examples of the power that divergence offers traders.
In closing, I would like to once again remind everyone about the FREE live streams hosted by myself each week. These live streams are an excellent opportunity for traders of all skill levels to ask questions and interact with me live. Again, this experience is entirely FREE to you. So if you haven’t already signed up, why are you waiting? Please fill out the form below to be notified before any of my future live streams.