Divergence Indicator Multi [TradingFinder] MACD AO RSI DIV Chart

10월 10일

🔵Introduction

🟣What is Divergence in Financial Markets?

Divergence in technical analysis happens when the price of a stock moves in a direction opposite to certain indicators. This is a crucial concept in financial markets as it can signal either a trend reversal or a continuation of the current correction in the trend. Understanding divergence helps traders and analysts make more informed decisions.



🟣Positive Regular Divergence (RD+)

A positive regular divergence occurs at the end of a downtrend, where two price lows form. This divergence appears when the price chart shows a new low, but the indicator does not follow, signaling potential buying opportunities.



Positive divergence indicates increased buying pressure and reduced selling pressure, making it a useful signal for forecasting price increases.

🟣Negative Regular Divergence (RD-)

A negative regular divergence is seen during an uptrend when two price highs form. The price chart records a new high, but the indicator does not reflect this change, suggesting that a market downturn is likely.

This type of divergence shows strong selling pressure and weaker buying activity, which can help identify selling opportunities.




Both positive and negative divergences are powerful tools for identifying potential trend reversals and key support and resistance levels. For example, when an indicator trends upward while the price moves downward, this creates divergence, warning traders to reconsider their investment strategy.


🟣Different Types of Divergence in Trading

1.Regular Divergence:
o Positive Regular Divergence (RD+)
o Negative Regular Divergence (RD-)
2.Hidden Divergence:
o Positive Hidden Divergence (HD+)
o Negative Hidden Divergence (HD-)
3.Time Divergence.

Note: This guide focuses specifically on Regular Divergence.

🟣What is Regular Divergence?

Regular Divergence, often referred to as convergence, occurs when price action and indicators show conflicting patterns, usually signaling the end of a trend. Detecting regular divergence helps traders anticipate potential trend reversals or the formation of reversal patterns.

🔵How to Use
To optimize the detection of divergence, you can adjust the Fractal Period to specify the length of time for identifying divergence patterns.

Additionally, with the Divergence Detection Method, you can select oscillators like the MACD, RSI, or AO to base divergence detection on.

Divergence in MACD:

MACD divergence occurs when the price chart forms an opposite pattern compared to the MACD line, indicating a potential price reversal.



Divergence in RSI:

In a downtrend, if the price chart forms two consecutive lows with the second lower than the first, but the RSI shows two lows with the second higher, this indicates positive regular divergence, which is a buy signal.

On the other hand, during an uptrend, if the price forms two highs with the second higher than the first, but the RSI shows the second high lower, this points to negative regular divergence, indicating a sell signal.



Divergence in AO (Awesome Oscillator):

The AO indicator calculates histograms using the difference between 5-period and 34-period simple moving averages. It compares peaks and troughs of these histograms with price movements, detecting divergence and plotting lines and arrows to signal divergence.




🔵Table

The following table breaks down the main features of the oscillator. It covers four critical categories: Exist, Consecutive, Divergence Quality, and Change Phase Indicator.

Exist: If divergence is detected, a "+" will appear in this row.
Consecutive: Shows the number of consecutive divergences that have formed in a short period.

Divergence Quality: Evaluates the quality of the divergence based on the number of occurrences. One is labeled "Normal," two are "Good," and three or more are considered "Strong."

Change Phase Indicator: If a phase change is detected between two oscillation peaks, this is marked in the table.