Divergences

A divergence occurs when the trend of a currency pair's price doesn't agree with the trend of an indicator. (I.e. the indicator is trending down while the price is trending up)

When divergences occur, prices usually change direction to confirm the trend of the indicator This occurs because indicators are better at gauging price trends than the prices themselves.

Created with Interbank FX Trader, © 2002-2003 MetaQuotes Sofware Corp.

The chart above is an example of "divergence" with the RSI, note how the RSI started to trend up while the Euro was still trending down. The Euro then reversed and started to trend up to conform with the RSI.

The chart above is an example of "divergence" with the stochastics, note how the Stochastic started to trend up (forming a series of Higher Lows while the Euro was still trending down. The Euro then reversed and started to trend up to conform with the Stochastic

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