Recently, while analyzing the charts, I noticed that many people are easily confused by a phenomenon—prices are moving upward, but the indicators start to weaken, or conversely, prices are dropping, but the indicators show signs of strength. This is what I want to discuss today: the divergence phenomenon, which is also a very practical concept in technical analysis.

Simply put, divergence occurs when the price and the indicator are not in sync. There are two main types: bullish divergence and bearish divergence.

What is bullish divergence? It happens when the price is making new lows, but indicators like RSI or MACD are not following suit and instead start to rise, indicating that the downward momentum is weakening and a reversal might be near.

Conversely, bearish divergence occurs when the price is making new highs, but the indicators fail to confirm this and show signs of weakening, suggesting that the upward trend is losing strength and a pullback could be imminent.

From my experience, divergence signals are especially valuable when they appear at high or low extremes. They are even more reliable when the price is in overbought or oversold zones, as the warning signals tend to be stronger. However, there's an important pitfall—indicators are not 100% accurate, and divergence can sometimes produce false signals, especially in choppy markets.

Therefore, I recommend not relying solely on divergence for making decisions. The best approach is to combine it with other tools like moving averages, volume, support and resistance levels, to increase the reliability of the signals. Also, even if divergence signals are very clear, always remember to set stop-loss orders, because markets can always surprise you.

In summary, understanding the concept of divergence can help you better identify potential turning points, but the key is to have a comprehensive trading plan with proper stop-loss and take-profit levels, and to execute it strictly. Only then can you survive longer in trading.