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Divergence (RSI / MACD)
When price makes a new extreme but the indicator doesn't — a leading signal of trend exhaustion or reversal.
What it is
Divergence is the single most respected indicator signal in technical analysis. It occurs when price action and a momentum oscillator (RSI, MACD, Stochastic) disagree. REGULAR bearish divergence: price prints a higher high, but RSI prints a lower high — buyers are losing strength, reversal likely. REGULAR bullish: price lower low, RSI higher low — sellers exhausted. HIDDEN divergence is the opposite shape and signals trend CONTINUATION. Divergences fail more often than they work as standalone signals — they're best used as filters that veto trades against the dominant flow.
Example
BTC rallies to $78K, prints a new ATH a week later at $79K — but the 4h RSI high drops from 84 to 71. A bearish regular divergence. A position trader exits longs at $78,500. Two weeks later BTC is at $68K.
How Indikora uses Divergence
Indikora detects RSI and MACD divergences (regular + hidden) on every chart and flags them in the Final Verdict — divergences against the signal direction trigger an automatic warning.
Related terms
- RSI (Relative Strength Index) — Momentum oscillator on a 0–100 scale that flags overbought (>70) or oversold (<30) conditions.
- MACD (Moving Average Convergence Divergence) — Trend-momentum indicator: difference between 12 and 26-period EMAs, plotted with a 9-period signal line.
Strategy guides that cover this
- How to Trade with RSI — A Complete Strategy Guide
Three reliable RSI setups, when each works, and the mistakes that turn RSI from edge into noise - MACD Divergence Strategy — The Complete Playbook
How to spot, validate, and trade MACD divergence with high-conviction confluence checks