Guest post by Zone 99 Forex

Divergence can be identified from the oscillating indicators, the hottest of which are the MACD, Stochastic and RSI. Any of these running on your day trading chart with costs in either candlesticks or bar chart form can be used.

Bearish Divergence

Bearish divergency exists when the price chart is reputedly bullish but the oscillator is showing a bearish trend. But a line drawn across the highest highs of the oscillating indicator will show a falling trend. If you have got a signal to open a trade to go long, the deviation is signalling you not to do it. If you’ve got a signal to open a trade to go short, on the other hand, the deflection is confirming that and you can go ahead. Bullish Divergence

Bullish divergence is the other way round. It exists when the price movement on the day trading chart is apparently downward, but the oscillator is showing a rising trend.

Here a line across the lowest lows of the price chart will show bearish (downward) movement, while a line across lowest lows of the oscillator will be moving upward. The signal is the opposite to the prior one. Of course no system is 100 pc accurate and that is applicable to using deflection in trading just the same as anything else. Finance trading is dangerous and you can lose. Boost your profits by spotting patterns in deviation from the indicators on your day trading chart.