DIVERGENCE IS CONVERGENCE
✅There are several main ways to work on the stock exchange in trading.
Technical analysis , for example, is recognized as effective and is used by almost all market participants. But the disputes about indicator analysis do not stop for a long time. Some traders talk about the backwardness of the method because trading operations are performed faster every day. Others build successful strategies based on one or more indicators. Still, others combine two methods to find successful market entries and get an effective tool for making money on the stock exchange. Divergence is often used for this, which will be discussed below.
🔴What is divergence
Divergence is one of the strongest signals that indicator analysis can demonstrate. To obtain it, one of the possible oscillators is used. The divergence conditions are that the curve of the price chart diverges from the indicator data. For example, with an uptrend, the price continues to move up, while the oscillator shows a decrease in the interest of the main participants of the trading system. In this case, we should expect a change in the direction of the price.
Such a change does not always mean a new trend. Sometimes it can be a normal correction or price fluctuation. To determine the exact forecast, the methods of
technical analysis of divergence are used. The result largely depends on the timeframe, sometimes on the
support and resistance levels.
⚠️There is also an opposite process — convergence when the price of an asset decreases, and the indicator shows growth. This process is called convergence. Both signals are used in the Forex market, but they are known collectively as "divergence".
There are
bullish and
bearish divergences in the Forex market. In addition, divergence is divided into three types:
1️⃣Classic divergence.
2️⃣Hidden divergence.
3️⃣Extended divergence.
❗️To successfully trade currency pairs on Forex, taking into account divergence, you need to learn how to correctly read information from the market. A combination of indicators and fundamentals of
technical analysis will help in this. Divergence plays an important role, so its indicators cannot be ignored.
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