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RSI Divergence Trading Strategy
An RSI Divergence trading strategy will help you find the best possible entry for your trade when used correctly. RSI Divergence or Relative Strength index Divergence shws traders a loss of momentum and suggests the price will go the opposite direction. When looking for an RSI Divergence it is important to no that depending on the momentum of the price action it may continue in that direction before fully reversing.
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Using divergence is a popular way to identify potential trading opportunities. But how does it work and when does it stop working?
RSI Divergence occurs when the Relative Strength Index indicator starts reversing before price does. A bearish divergence consists of an overbought RSI reading, followed by lower high on RSI. At the same time, price must make a higher high on the second peak, where the RSI is lower. In a bullish divergence situation, there must be an oversold condition on the RSI, followed by a higher low on the RSI graph. Simultaneously, price must form a lower low on the second peak.
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