I just came across a pattern that many traders still underestimate – hidden divergences. It sounds complex, but once you understand it, it opens up a whole new perspective on chart movements.

The thing is: divergences signal that a trend is losing strength or that a consolidation is coming to an end. There are two main types. The classic divergence appears at the end of a longer trend and warns of a reversal. Then there's the hidden variant – it occurs within an existing trend, usually at the end of a sideways movement. A bearish divergence, for example, shows up when the price makes new highs but the indicator becomes weaker. That’s a strong sell signal.

I’ve observed this multiple times with Bitcoin and Ethereum. For example, in February 2021: Bitcoin kept making higher lows, but the RSI showed lower lows – a classic bullish hidden divergence. Bitcoin then rallied nearly 20%. Conversely: in March 2021, when a bearish divergence appeared, Bitcoin dropped 12% within two days. The pattern works.

How do I recognize this practically? You need an indicator – RSI, MACD, or Stochastic all work. The trick is to pay attention to the discrepancy between price movement and the indicator. In an uptrend, I look for bullish patterns and ignore the bearish ones. In a downtrend, I do the opposite. A bearish divergence in the context of a downtrend is especially reliable.

Important: Don’t get emotional. In real-time trading, it’s hard to spot the pattern immediately. You’re in a trade, happy about profits, and suddenly realize a bearish divergence is forming. That’s why: set a stop-loss, define a target (at least twice the stop-loss), and remove emotions from the equation.

One warning, though: the later you discover the divergence in a trend, the less profitable it often becomes. And with smaller coins, the pattern is less reliable than with Bitcoin or Ethereum – less liquidity, more volatility. But if you spot the divergence early during a consolidation and it aligns with the larger trend, it can be a real game-changer. Mastering this pattern gives you a real advantage in crypto trading.