Bearish regular divergence shows:

Price higher high, RSI lower high. Price making higher highs while RSI makes lower highs = bearish reversal signal.

Divergence Trading

When price and indicators disagree

Divergence occurs when price and an indicator move in opposite directions. It's one of the most powerful reversal signals.

Regular Divergence (reversal): - Bullish: Price lower lows → Indicator higher lows (momentum weakening on downside) - Bearish: Price higher highs → Indicator lower highs (momentum weakening on upside)

Hidden Divergence (continuation): - Bullish: Price higher lows → Indicator lower lows (trend strength) - Bearish: Price lower highs → Indicator higher highs (trend strength)

Best indicators for divergence: RSI, MACD, Stochastic

Rules: - Higher timeframe divergence is more significant - Wait for price confirmation before entering - Use for timing entries, not as standalone signals

Pro tip: Daily RSI bearish divergence with price at a key resistance level is one of the highest-probability short setups.

Common mistake: Trading every divergence on a 5-minute chart. Better: Focus on divergence on 4H and daily charts — lower timeframes produce too many false signals.

Key takeaways

Regular divergence = reversal signal
Hidden divergence = continuation signal
RSI and MACD are best for spotting divergence
Higher timeframe divergence is more reliable

Quiz

Bearish regular divergence shows: Answer: Price higher high, RSI lower high. Price making higher highs while RSI makes lower highs = bearish reversal signal.

Educational content, not financial advice.