📉 Your Ultimate Guide to RSI Divergence (Settings & Tips) 📈

20 jun 2021

Hey traders,
Relative strength index is a classic technical indicator.
It is frequently applied to spot a market reversal.
RSI divergence is considered to be a quite reliable signal of a coming trend violation and change.

Though newbie traders think that the application of the divergence is quite complicated, in practice, you can easily identify it with the following tips:

💠First of all, let's start with the settings.
For the input, we will take 7/close.
For the levels, we will take 80/20.

Then about the preconditions:
1️⃣ Firstly, the market must trade in a trend (bullish or bearish)
with a sequence of lower lows / lower highs (bearish trend) or higher highs / higher lows (bullish trend).

2️⃣ Secondly, RSI must reach the overbought/oversold condition (80/20 levels) with one of the higher highs/higher lows.

3️⃣ Thirdly, with a consequent market higher high / lower low, RSI must show the lower high / higher low instead.

➡️ Once all these conditions are met, you spotted RSI Divergence.
A strong counter-trend movement will be expected.

Also, I should say something about a time frame selection.
Personally, I prefer to apply it on a daily time frame, however, I know that scalpers apply divergence on intraday time frames as well.

❗️Remember, that it is preferable to trade the divergence in a combination with some price action pattern or some other reversal signal.

❤️Please, support this idea with a like and comment!❤️