An RSI divergence indicator signal shows traders when price action and the RSI are no longer showing the same momentum. The RSI shows the magnitude of a price move in a specific timeframe. The RSI is one of the most popular oscillators used in technical analysis. A divergence looks at it in relation to the current price action.
Divergence is a signal that the current trend in the time frame on the chart has lost momentum. This is a possible signal and set up to bet on a reversal in the direction of the market price action. An RSI divergence is saying that the indicator does not agree with the price action.
How to trade the indicator:
A bullish divergence is signaled when the RSI indicator has an oversold reading then a higher low that correlates to lower lows in the price action. This can show increasing bullish momentum, a break out back above an oversold reading is a common buy parameter used to signal a new long position.
A bearish divergence is signaled when the RSI indicator has an overbought reading then a lower high that correlates to higher highs in the price action. This can show decreasing momentum and a potential reversal in the uptrend. A break down back below an overbought reading is a common profit taking or short selling parameter used to signal a new short position.
This is a MetaTrader 5 (MT5) indicator and works with all currency pairs and all timeframes. Once you download and install the indicator, it will appear in your trading chart, like the image shown above.
This Download is for VIP Members Only. Not a VIP Member? Join & Get Instant Access Now.
