Hidden Divergence

Hidden Divergence

Divergence, which is a term that technicians use when two or more averages or indices fail to show confirming trends,is one of the mainstays of technical analysis.Here’s a new way to use oscillators and divergence as well as methods to locate entry levels during a trend.

Most technical indicators mirror or confirm price movement. When price moves up, the indicator moves up; when price moves down, the indicator moves down. When prices peak, the indicator peaks; and when prices bottom, the indicator bottoms. Sometimes, however, a discrepancy occurs between price and indicator movement. That screpancy is known as non confirmation and can be seen most clearly on overbought or oversold indicators as well as on indicators that move above or below a zero line.
Many traders only learn to recognize the type of non confirmation that occurs at market tops and bottoms, which is the classic divergence. But there are other forms of non confirmation I call hidden divergence (HD) that, when present,offer additional profit potential.

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