Divergence of technical indicators refers to the inconsistency between the stock price movement and the technical indicator movement. In the analysis, divergence is seen as an important signal that the market trend may reverse. In this article, we will briefly introduce the concept, types, and application methods of technical indicator divergence.
1. The concept of divergence.
Divergence refers to when the stock price does not move in line with the technical indicator, and this inconsistent movement can be divided into two types: top divergence and bottom divergence. The top divergence occurs at the high end of the stock price, which is manifested by the fact that the stock price continues to reach new highs, while the highs of technical indicators fail to surpass the previous highs. Divergence occurs at the lower end of the stock price, which is manifested in the fact that the stock price continues to make new lows, while the low of technical indicators fails to fall below the previous low.
2. Types of divergence.
1.Top divergence: When the stock price keeps making new highs, but the technical indicators fail to make new highs, it is called a top divergence. This situation usually indicates that the market is weakening and there may be a correction or a correction.
2.Bottom divergence: When the stock price keeps hitting new lows, but the technical indicators fail to make new lows, it is called bottom divergence. This situation usually indicates that the market is weakening and may be able to do so.
3. Application methods of divergence.
1.Identify divergence signals: Determine whether there is a divergence by observing the trend of stock prices and technical indicators. When a top divergence signal occurs, it means that the market is likely to reverse**;When a bottom divergence signal occurs, it means that the market is likely to reverse**.
2.Combined with other technical indicators: divergence can be used as an early warning sign of market movements, but it does not necessarily mean an immediate reversal. Investors can combine other technical indicators, such as MACD, RSI, etc., to conduct comprehensive analysis to improve the accuracy of judgment.
3.Pay attention to the weekly divergence: There are many deceptive lines in the daily divergence, and it is recommended that investors pay attention to the divergence phenomenon on the weekly line to improve the success rate of actual operations.
4.Pay attention to risk control: divergence is not absolutely reliable, and there are cases of failure. When using divergence analysis, investors should combine their own risk tolerance and do a good job in risk control, so as to avoid blindly chasing up and down due to a single signal.
In short, the divergence of technical indicators is an important market signal, and investors can grasp the changes in market trends in advance by observing the divergence between stock prices and technical indicators. In actual operation, a variety of technical indicators should be combined for comprehensive analysis to improve the accuracy of judgment and actual combat effect. At the same time, pay attention to risk control and avoid investment mistakes caused by a single signal.