One of the basic tenets of technical analysis is that momentum precedes price.
However, prices never move in a smooth line, and momentum will often be out of sync with the price.
In technical analysis, when there is a mismatch between momentum and the actual price, it’s referred to as a divergence. Traders can exploit these price discrepancies for profit.
Divergences are concepts that allow investors to spot trend reversal signals in bullish and bearish markets.
This trading guide takes an in-depth look at what divergence is, the different types of divergences, and how to trade divergence in the most efficient way.
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