Examples of Divergence

There are four different types of divergences that can occur in Forex. “Regular” divergences are considered to be the most important because they often give better quality signals when compared to “hidden” divergences. A regular pattern often signals a switch in what is currently being shown, while a hidden pattern signals that the same trend displayed will continue onwards.

Regular Bullish– this type of divergence in Forex, also called a positive divergence, shows as prices make lower than normal lows, but indicators still reflect higher lows. This usually signals that prices will end up taking a sharp uptick rather than continuing to fall.

Regular Bearish– a regular bearish divergence in Forex, or negative divergence, displays as a pattern with high prices above previous highs, all while the new high indicator is below previous highs. This often can signal that it will soon turn downward in trend and price.

Hidden Bullish– this is a divergence in Forex that will display prices as having higher bottoms, but the technical indicators will show lower bottoms. This “positive reverse divergence” usually shows an upward trend that can be predicted to continue onward.

Hidden Bearish– this is a pattern referred to as a “negative reverse divergence” in Forex. This type of divergence in Forex can be spotted by seeing a price with lower tops, and the indicator will show a higher overall top in price.