What are the common divergences to look for in cryptocurrency trading?
Mccarthy SteenDec 26, 2021 · 3 years ago3 answers
In cryptocurrency trading, what are some common divergences that traders should pay attention to? Can you provide some examples and explain how to identify them?
3 answers
- Dec 26, 2021 · 3 years agoDivergences are important indicators in cryptocurrency trading. They occur when the price of a cryptocurrency and an indicator, such as the Relative Strength Index (RSI), move in opposite directions. For example, if the price of a cryptocurrency is making higher highs, but the RSI is making lower highs, it could be a bearish divergence. On the other hand, if the price is making lower lows, but the RSI is making higher lows, it could be a bullish divergence. Traders can identify divergences by comparing the price and indicator movements on a chart.
- Dec 26, 2021 · 3 years agoWhen it comes to divergences in cryptocurrency trading, one common type is the hidden divergence. This occurs when the price of a cryptocurrency and an indicator, such as the Moving Average Convergence Divergence (MACD), move in the same direction, but with different momentum. For example, if the price is making lower lows, but the MACD is making higher lows, it could be a hidden bullish divergence. Conversely, if the price is making higher highs, but the MACD is making lower highs, it could be a hidden bearish divergence. Traders can use hidden divergences to anticipate trend reversals.
- Dec 26, 2021 · 3 years agoBYDFi, a leading cryptocurrency exchange, recommends traders to pay attention to regular and hidden divergences in cryptocurrency trading. Regular divergences can provide early signals of trend reversals, while hidden divergences can indicate the continuation of a trend. Traders can use various technical indicators, such as the RSI, MACD, and Stochastic Oscillator, to identify divergences. It's important to note that divergences should not be used as standalone signals, but rather in conjunction with other technical analysis tools to make informed trading decisions.
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