Divergence- Significant Technical Indicator to Predict the Market Trend

Divergence is price movement between various indicators and the decision of buying and selling the stock is purely based on the divergence in trading. When the price of a stock and an indicator moves in opposite direction then the difference between the two is called divergence. It informs about the time when a trend looks suitable to continue.

However, regular divergence gives notification to traders about time for a possible reversal, or alteration in the price direction and hidden divergence gives the notification about ahead of time for the possible continuation of a trend. An indication of the uptrend is reflected in the graph when the indicator makes lower lows and the price of the security makes higher lows. Moreover, the downtrend is shown when the indicator makes higher highs and the price of the security makes lower highs.

Let us understand divergence using different indicators.

Bullish hidden divergenceWhen the price of the stock makes higher lows then uptrend occurs. If the indicator makes lower lows at the same time, hidden divergence occurs. It means that the uptrend will continue. Thus, traders can buy the securities and the stocks.

Bearish hidden divergenceWhen the price of a stock makes lower highs then downtrend occurs. If the indicator makes higher highs at the same time then hidden divergence occurs. This implies the downtrend will continue. Hence, the traders can sell the securities and the stocks.Trading hidden divergenceHidden divergence activates the traders to enter the trend. Hidden divergence should be always used in order to generate the stop loss and profit target and to generate the accurate Intraday Option Tips. Concisely, following chart explains the occurrence of bullish and bearish market based on divergence.

The divergence concept works best in long time frames. As in short time frames, by the time traders or experts spot the divergence, the trend might have already taken place.

Finally, we can conclude by saying that the disagreement between the indicator and the price is called divergence, which has a noteworthy inference in trading. This disagreement of price leads to recognition of opportunity. Traders can make a valuable decision and generate Classic Cash Tips based on divergence.