What is divergence? Divergence refers to a situation when a currency pair price diverges from the trend that the technical indicators are showing. So if the technical indicators are making a lower high but the currency pair price witnesses a higher high, it indicates that there is a price divergence in the market.
What is a bullish divergence? In a bullish divergence, the currency pair prices make a new low in the market, but the technical indicators mark a higher price. This signals that bears in the market are no more in control, and bulls are getting stronger, indicating a bullish reversal after the downtrend ends. At this point, traders can place long orders to benefit from the increasing market prices.
How to trade divergence in CRYPTO Identify the existing trend in the market. Draw support and resistance lines to spot the divergence and confirm the reversing or continuation signals. Monitor the high and low price levels in the market during the particular time period. After sitting the divergence, understand what it is indicating to place long or short orders accordingly. Wait for your trading strategy to provide you with an entry signal before placing an order. You can trade regular divergences by spotting them in markets making higher highs (or higher lows) but the technical indicator marking a lower high (lower low). At this point, place a short (or long) order to trade the expected downtrend (or uptrend) reversal. You can trade hidden divergences by spotting them in markets marking higher lows (or lower highs) but the indicator marking lower lows (or higher highs) simultaneously. This sends a market continuation signal to the traders and indicates to them to enter a trade during an existing uptrend and exit a trade during a current downtrend.
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