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1.5 - Mastering (RSI) Divergence as a leading Indicator

RSI

RSI is a price momentum indicator with reading of overbought and oversold

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  • Areas below 30 suggest oversold and areas above 70 suggest overbought
  • The RSI is considered "reset" when it goes from one extreme to the other (70 to 30)

Divergence

  • Divergence is when the price and indicator show different structures.
  • Bullish divergence increases the probability that a reversal will happen with more force and shouldn't just go sideways
  • When looking for divergence, you can only count it after a "reset"
  • Divergence isn't confirmed until a pivot is in, until then it's just potential divergence

Bullish divergence Bearish divergence


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