What is RSI Divergence
RSI (Relative Strength Index) Divergence is used by price action traders to enter or exit in any trade. An RSI Divergence is created when RSI (Relative Strength Index) line diverges the momentum of the market or we can say opposes the price with respect to RSI (Relative Strength Index).
When the price is making Higher High but in RSI (Relative Strength Index) making lower low or price making Lower Low or RSI (Relative Strength Index) making Higher High can be said to be a divergence. There are 2 types of divergence:
Bullish Divergence
Bullish Divergence occurs when price making continuous lower low with respect to RSI (Relative Strength Index) making a higher high, then it’s called Bullish Divergence. Remember trade divergence when you see market-making swings with high momentum otherwise sometimes false divergence occurs.
Live Example
As you can see price making lower low but RSI (Relative Strength Index) going down (Making Higher high).
Bearish Divergence
Bearish Divergence occurs when the market making a higher high with respect to RSI (Relative Strength Index) making a lower low is said to be Bearish Divergence.
Live Example
Price making higher high with respect to RSI (relative strength index) making a lower low.
Also Read: What is the RSI indicator?
Note: Always Trade indicators wisely with proper risk management else your trading funds will always at high risk.
