Price-Oscillator Divergences Explained

A few days ago, I led a webinar on the subject of price-oscillator divergences. There was a lot of interest in the subject, so I thought I would post the chart illustrations of the different kinds of divergences here, along with some explanations:

------

Bearish Regular Divergence – price makes a higher high while the oscillator makes a lower high. This is a warning or indication of a potential impending bearish reversal after an uptrend.

------

Bullish Regular Divergence – price makes a lower low while the oscillator makes a higher low. This is a warning or indication of a potential impending bullish reversal after a downtrend.

------

Bearish Hidden Divergence – price makes a lower high while the oscillator makes a higher high. This is a warning or indication of a potential downtrend continuation.

------

Bullish Hidden Divergence – price makes a higher low while the oscillator makes a lower low. This is a warning or indication of a potential uptrend continuation.

- James Chen, CTA, CMT

* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.

* Follow my intraday forex updates on Twitter: http://twitter.com/JamesChenFX" rel="nofollow" target="_blank