Divergences

Divergences occur when the price of an asset is moving in the opposite direction of a technical indicator.

For example, Price is going up and an indicator is under the impression that strength in the price rise is getting weaker.

Even when indicators are showing such signs, they are not always accurate and inexperienced traders tend to lose money relying on these indicators.

If you are going to use divergences you must learn to use them correctly and know how to spot hidden divergences within the price action.

This tutorial will show you several examples of where relevant divergences have occurred and how you could trade them along with additional confluence.

Time Stamps

2:37 – LTC Previous COTW (DO NOT TRADE THIS)

• When for instance Weekly level is so close to Monthly, Daniel leaves the higher TF level on the chart
• Generally, take newer levels unless older ones are being very respected

 15:31 – DIVERGENCES

• Daniel never, ever, ever trades from divergences alone
• He does not really use indicators, he looks at the last to just add to the confluence
• Noobs are obsessed with them and 95% lose money (so think …)
• EXAMPLE: price goes sideways for some time then a massive move to the upside occurs, a little drop, and another move up. This type of action will always show bearish divergences – momentum on the secondary rise cannot be the same as on the first one. So, it does not mean you should short

 23:21 – BULLISH DIVERGENCES = REVERSAL

• Price makes a lower low
• Oscillator makes higher low

 29:12 – BEARISH DIVERGENCES = REVERSAL

• Price makes a higher high
• Oscillator makes lower high

 Bear in mind that calculations on oscillators are calculated from candle closes not wicks. Bearish divergences can be useful if the price comes into HTF resistance (buying drying out). 

 31:04 – HIDDEN BULLISH DIVERGENCES = CONTINUATION OF UPTREND

• Price makes a higher low
• Oscillator makes lower low
• It happens on the uptrend = buy the dip

 34:29 – HIDDEN BEARISH DIVERGENCES = CONTINUATION OF DOWNTREND

• Price makes a lower high
• Oscillator makes higher high
• In downtrend price rises into resistance = short the rally

 37:53 – DIVERGENCES CLASS

• It is impossible to predict divergences, depending on momentum (they lag)
• Divergences are useful on LTF when you are scalping (tiny pullbacks) – just do not expect too much of them

 43:17 – Q&A + EXAMPLES + BTC TA + ALTS