Understand the concept of regular divergence?

What is a regular divergence?

regular divergence is used as a possible sign for a trend reversal.

There are two types of regular divergences: bullish and bearish.

Regular Bullish Divergence

If the price is making lower lows (LL), but the oscillator is making higher lows (HL), this is considered to be regular bullish divergence.This normally occurs at the end of a DOWNTREND.

After establishing a second bottom, if the oscillator fails to make a new low, it is likely that the price will rise, as price and momentum are normally expected to move in line with each other.

Below is an image that portrays a regular bullish divergence.

Regular Bullish Divergence

Regular Bearish Divergence

Now, if the price is making a higher high (HH), but the oscillator is lower high (LH), then you have regular bearish divergence.This type of divergence can be found in an UPTREND.

After price makes that second high, if the oscillator makes a lower high, then you can probably expect the price to reverse and drop.

In the image below, we see that the price reverses after making the second top.

Regular Bearish Divergence

As you can see from the images above, the regular divergence is best used when trying to pick tops and bottoms.

You are looking for an area where the price will stop and reverse.The oscillator signals to us that momentum is starting to shift and even though the price has made a higher high (or lower low), chances are that it won’t be sustained.

Now that you’ve got a hold on regular divergence, it’s time to move and learn about the second type of divergence….hidden divergence.

Don’t worry, it’s not super concealed like the Chamber of Secrets and it’s not that tough to spot.

The reason it’s called “hidden” is that it’s hiding inside the current trend.

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### Unraveling the Dynamics of Forex Regular Divergence

In the world of **forex trading**, understanding various **price indicators** is crucial for making informed decisions. One such powerful tool is ***divergence***, a concept that can provide valuable insights into potential **market reversals** and **trends**. In this comprehensive guide, we delve deep into the realm of **forex regular divergence**, exploring its nuances, significance, and practical implications for traders.

#### The Fundamentals of Divergence
**Divergence** in forex trading refers to the discrepancy between **price movements** and **indicator behavior**. It occurs when the **price** of a **currency pair** moves in a different direction from the **technical indicator**. This disparity often signals a possible **shift** in **market sentiment** and may indicate an upcoming **reversal** or **continuation** of a trend.

#### Types of Divergence
There are two primary types of **divergence** in **forex** trading: **regular** and **hidden**. In this article, our focus is on **regular divergence**, which is further classified into **bullish** and **bearish divergence**.

#### Bullish Divergence
**Bullish divergence** occurs when the **price** of a currency pair forms **lower lows**, while the **indicator** creates **higher lows**. This phenomenon suggests that **selling pressure** is weakening, and an upward **price movement** may be on the horizon.

#### Bearish Divergence
**Bearish divergence**, on the other hand, materializes when the **price** of a currency pair makes **higher highs**, while the **indicator** forms **lower highs**. In this scenario, it implies that **buying pressure** is diminishing, hinting at a **potential downtrend**.

#### Identifying Divergence
To **spot divergence** on **price charts**, traders typically use **oscillators** like the **Relative Strength Index (RSI)**, **Moving Average Convergence Divergence (MACD)**, or the **Stochastic Oscillator**. These **indicators** help in visualizing **divergence patterns** and can assist traders in making **informed trading decisions**.

#### Trading Strategies with Divergence
**Incorporating divergence** into your **trading strategy** can be a powerful tool for **timing entries** and **exits**. For instance, some traders use **divergence** to confirm **reversal signals** or to **anticipate trend continuations**. It is essential to combine **divergence signals** with other **technical analysis tools** for **enhanced accuracy**.

#### Risk Management and Divergence
While **divergence** can be a valuable **trading signal**, it is imperative to pair it with **sound risk management** practices. **Setting stop-loss orders** and **managing position sizes** are critical aspects of mitigating **trading risks** and **protecting capital**.

#### The Psychology Behind Divergence
Understanding the **psychology** behind **divergence** is key to interpreting **market dynamics** accurately. **Bullish divergence** reflects **optimism** creeping into the market, while **bearish divergence** signifies **pessimism** among traders.

#### Incorporating Divergence in Your Trading Plan
As you hone your **forex trading skills**, consider integrating **regular divergence** analysis into your **trading plan**. By mastering the art of **identifying divergence patterns** and **interpreting signals**, you can gain a **competitive edge** in the dynamic world of **currency trading**.

### Conclusion
**Forex regular divergence** is a potent **technical analysis tool** that can empower traders to navigate the **volatile forex markets** with **confidence**. By mastering the **art of divergence analysis** and **integrating it** into your **trading strategy**, you can elevate your **trading proficiency** and **strive for consistent success** in the ever-evolving world of **forex trading**.

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