One of the most important skills to be able to identify reversal or continuation in a trend is through the detection of divergence patterns. Divergence is when the price action and an indicator diverge, so that when the indicator moves in the opposite direction, it makes a divergence. Such discrepancies can also enable traders to identify the weakening momentum and this is an indication that a trend is losing strength or it might be reversing. Utilizing divergences well assists traders in making more accurate entry and exit timings.
The first move traders usually make is to compare the recent price peaks and the lows with the respective movements of the momentum indicators. In the case of an example, when price makes a new high and the RSI makes a lower high, then there is bearish divergence indicating that there may be selling pressure. On the other hand, when price takes a new low and the indicator indicates a new high, then the bullish divergence can be an indicator of an impending upward trend. These trends give a warning of any major market changes.
Divergence can be studied using tools such as TradingView charts. Indicators can be overlaid by the user and trendlines can be drawn on price and indicator screens together with marking divergence points graphically. Multi-timeframe analysis enables the traders to verify signals in long and short durations, which in turn minimizes the possibility of false signals. The ability to follow various divergence patterns at once in different instruments using customizable chart layouts and drawing tools allow one to easily follow and track multiple patterns.
The divergence due to volume gives a second point of understanding. The strength or the weakness of a trend can be verified by observing price movements versus volume indicators, like On-Balance Volume or Volume Profile. In a case in point, when price rises on falling volume this can indicate a downward trend which is in line with possible bearish divergence. Momentum and volume analysis give a better trading decision on divergence when combined.
Alerts and visual indicators help traders catch divergence signals. The TradingView charts show traders the ability to mark the observed divergence points, important levels, and alerts when a price or other indicators reach an important area. The features aid in making sure that traders will not miss actionable divergence arrangements, despite tracking multiple charts or instruments. Clear annotations and alerts enable one to react to the arising opportunities promptly.
Historical analysis improves divergence trading. Review past price action and indicator behavior on TradingView to identify reliable divergence patterns. Practice these signals on past data from bull markets, bear markets, and sideways action before risking money.
With the markets still developing, it is still a strong weapon of the traders who want to gain advantages by spotting the patterns of divergence. TradingView shows price patterns, volume spikes, and key support/resistance levels. Set alerts for your setups and check how similar patterns worked historically. This improves entry timing and cuts down on bad trades.
