RSI Trading Indicator Divergence Trading Setups
Stock Index Divergence is one of the trade setups used by traders. It involves looking at a Stock Indices trading chart & one more Stock Indices technical indicator. For our example we shall use the RSI Stock Index indicator.
To spot this Stock Indices divergence trading setup find two Indices trading chart points at which price makes a new swing high or a new swing low but the RSI Stock Index indicator does not, indicating a divergence between price and momentum.
RSI Stock Index Divergence Example:
In the Stock Indices trading chart below we identify two Indices trading chart points, point A & point B (swing highs)
Then using RSI Stock Index indicator we check the highs made by the Stock Indices RSI indicator, these are the highs that are directly below the Stock Indices Trading Chart points A & B.
We then draw one line on the Stock Indices trading chart & another line on the RSI Stock Index indicator.
RSI Divergence Stock Indices Trading Set Up - Stock Index Divergence Trading using RSI Indicator
How Do You spot Stock Index divergence
In order to spot this Stock Indices divergence setup we look for the following:
HH=Higher High- two highs but the last one is higher
LH= Lower High- two highs but the last one is lower
HL=Higher Low- two lows but the last one is higher
LL= Lower Low- two lows but the last one is lower
First let us look at the illustrations of these Stock Indices trading terms
Divergence Stock Indices Trading Terms Definition
Stock Index Divergence Trading Terms Definition Examples
There are two types of Stock Index divergence setups:
- Classic Divergence
- Hidden Divergence
