common-close-0
BYDFi
Trade wherever you are!

What is the meaning of divergences in the context of cryptocurrency?

avatarmohaned DhibDec 26, 2021 · 3 years ago1 answers

Can you explain what divergences mean in the context of cryptocurrency? How do they affect the market and trading strategies?

What is the meaning of divergences in the context of cryptocurrency?

1 answers

  • avatarDec 26, 2021 · 3 years ago
    Divergences in the context of cryptocurrency are an important aspect of technical analysis. They occur when the price of a cryptocurrency and an indicator, such as the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD), move in opposite directions. Divergences can provide valuable information about the strength of a trend and potential reversals. For example, a bullish divergence occurs when the price makes a lower low, but the indicator makes a higher low. This suggests that the selling pressure is weakening and a bullish reversal may occur. Conversely, a bearish divergence occurs when the price makes a higher high, but the indicator makes a lower high. This suggests that the buying pressure is weakening and a bearish reversal may occur. Traders often use divergences to confirm their trading signals and make more informed decisions in the cryptocurrency market.