Divergence Trading Part -1 #Tradingview

Topic - Divergence Trading Part -1

What is divergence trading?

Divergence is when the asset price moves in the direction opposite to what a technical indicator indicates. When a stock is diverging, it signals weaker price trends and the beginning of a reversal. The two types of divergence are: Positive: A positive divergence is a sign of higher price movement in the asset.

Momentum plays a key role in assessing trend strength because trends are composed of a series of price swings and it's important to know when a trend is slowing down. Less momentum doesn't always lead to a reversal but it does signal that something is changing and the trend may consolidate or reverse.

Price momentum refers to the direction and magnitude of price. Comparing price swings helps traders gain insight into price momentum.

KEY TAKEAWAYS

Price momentum is measured by the length of short-term price swings. Steep slopes and a long price swing represent strong momentum

Weak momentum is represented by a shallow slope and a short price swing.

Momentum indicators include the relative strength index, stochastics, and the rate of change.

Divergence or disagreement between indicators can have major implications for trade management.

Defining Price Momentum

The magnitude of price momentum is measured by the length of short-term price swings. The beginning and end of each swing are established by structural price pivots that form swing highs and lows. Strong momentum is exhibited by a steep slope and long price swings. Weak momentum is seen with a shallow slope and short price swing.

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