Your Essential Divergence Cheat Sheet for Price Action Trading

When you’re analyzing charts, recognizing divergence patterns becomes one of your most powerful tools. A divergence cheat sheet is basically your roadmap for spotting when price action and RSI indicators stop moving in sync — and that’s when something significant is about to happen. Let me walk you through exactly how to identify and use these four fundamental divergence patterns.

Understanding Regular Divergence Signals

Regular divergence is your early warning system for potential reversals. When price keeps hitting lower lows but your RSI indicator is actually making higher lows, that’s a regular bullish divergence — and it’s telling you that upside reversal might be coming after that downtrend. Flip the scenario: if price is climbing to higher highs while RSI is making lower highs, you’ve spotted a regular bearish divergence, which suggests a downside reversal could follow once the uptrend exhausts itself.

Recognizing Hidden Divergence Patterns

Hidden divergence works differently — it’s your confirmation that the current trend wants to keep going. A hidden bullish divergence appears when price shows higher lows but RSI shows lower lows; this pattern signals that your uptrend will likely continue after a pullback. On the flip side, when price forms lower highs while RSI forms higher highs, you’re seeing a hidden bearish divergence, which indicates the downtrend has more room to run after the pullback.

Quick Reference Guide to All Divergence Types

Here’s your complete divergence cheat sheet breakdown at a glance:

Regular Divergence (Reversal Signals):

• Bullish type: Lower lows in price with higher lows in RSI → Upside reversal likely
• Bearish type: Higher highs in price with lower highs in RSI → Downside reversal likely

Hidden Divergence (Continuation Signals):

• Bullish type: Higher lows in price with lower lows in RSI → Uptrend continues
• Bearish type: Lower highs in price with higher highs in RSI → Downtrend continues

The key takeaway is mastering this divergence cheat sheet lets you distinguish between markets that are about to reverse direction versus markets that are simply pulling back before continuing their existing trend. That distinction is exactly what separates traders who catch the big moves from those who get whipsawed by false signals.