What is "divergence" in trading? Tips for identifying tops and bottoms.

The term “divergence” often heard in cryptoasset trading actually refers to the phenomenon where price and technical indicators deviate, and it is a powerful tool for capturing market reversal points.

Divergence at the Ceiling Area (Bearish Divergence)

Pattern: Even though the price is making new highs, indicators like RSI and MACD are declining.

Meaning: A signal that the upward momentum is weakening. It may decline from here.

Divergence at the Bottom Price Range (Bullish Divergence)

Pattern: The price is making new lows, but the indicator is pointing upwards.

Meaning: A signal that the downward momentum is losing strength. A chance for a rebound may be near.

Key Points to Note

Available Indicators: RSI / MACD / Stochastic, etc.

Signal Strength: When divergence appears in overbought or oversold zones, reliability increases.

⚠️ Don't forget this part

• Indicators are not perfect. There are also false signals.
• Don't judge solely by divergence. Combine with moving averages, volume, and support/resistance.
• Be cautious of false signals in a range market
• Always set a stop loss before entry
• It is wise to confirm using multiple technical indicators before taking action.

In short, divergence is a precursor to a reversal, but relying solely on it is a no-go. Risk management and compound analysis are the iron rules for trading survival.