RSI Indices Indicator Divergence Indices Trading Setups
Indices Divergence is one of the trade setups used by Indices traders. It involves looking at a stock indices chart & one more technical indicator. For our example we shall use the RSI indicator.
To spot this stock indices divergence trading setup find two stock chart points at which stock indices trading price makes a new swing high or a new swing low but the RSI indicator does not, indicating a divergence between stock indices trading price & momentum.
RSI Indices Divergence Example:
In the stock indices chart below we spot two stock chart points, point A and point B (swing highs)
Then using RSI indicator we check the highs made by the indices trading RSI technical indicator, these are highs that are directly below the indices Chart points A & B.
We then draw one line on the stock indices chart & another line on the RSI indicator.
RSI Divergence Indices Trading Setup - Divergence Indices Trading using RSI Technical Indicator
How to spot indices trading divergence
In order to spot this stock indices trading divergence setup we look for the following:
HH=Higher High- two highs but the last one is higher
LH= Lower High- 2 highs but the last one is lower
HL=Higher Low- two lows but the last one is higher
LL= Lower Low- 2 lows but the last one is lower
First let us look at the illustrations of these indices trading terms
Divergence Indices Trading Terms Definition
Divergence Indices Trading Terms Definition Examples
There are two types of stock indices trading divergence setups:
- Classic Indices Trading Divergence
- Hidden Stock Indices Trading Divergence
