RSI Divergence Trading

RSI divergence is fairly reliable, especially when used alongside other technical indicators for confirmation. However, like all technical tools, it's not foolproof and should be used as part of a broader strategy that includes risk management.

A bullish divergence occurs when the price of a security is moving downwards along with making lower lows while the RSI indicator is making higher lows. These movements indicate an increasing bullish momentum where traders can enter a long position when the security shows signs of upward reversal.

Examples of bullish RSI divergence: Example 1: Stock price falls to a new low, but RSI forms a higher low. Example 2: Forex pair decreases in value, but RSI shows increasing troughs. Example 3: Cryptocurrency drops, but RSI indicates an upward momentum shift