BTC bullish CLASSIC divergence rsi
RSI Hidden Divergence Trading Examples
Some traders identify a hidden divergence and jump into the market immediately. But I find it more useful to think of a hidden divergence as an alert for possible continuation setups.
Once the alert is issued, we can start looking for continuation trade entries. Short-term bar patterns are helpful at this stage.
Trading Tips And Review
As we’ve pointed out, when marking hidden divergences, the choice of the first swing pivot is critical.
Choose a solid pullback swing that stands out on the chart. It leads to a more reliable RSI hidden divergence. Don’t choose a meandering sideways consolidation.
If you review the examples above, you’ll find a few regular divergences as well. Regular divergences point to reversal, while the hidden ones get you into pullbacks. Such conflicting signals present a problem for our analysis.
But unless other factors support a reversal, give more weight to hidden divergences. (Examples of reversal factors are climactic volume, significant support/resistance, and prolonged congestion.)
Finally, let’s wrap up by reconciling the standard RSI strategy with the hidden divergence.
Recall the standard oversold and overbought RSI strategy. When the RSI falls below 30, we buy; when the RSI rises above 70, we sell. This basic strategy uses arbitrary levels of 30 and 70.
Think of the hidden divergence approach as necessarily the same strategy.
However, instead of 30/70, we use oversold and overbought levels implied by the first swing pivot. (For instance, in Example #1, we were using RSI value 55 as the oversold level.) Hence, this approach seeks to adapt to current market conditions.
If you want to learn more about hidden divergences, check out this review on the MACD Hidden Divergence.
RSI Hidden Divergence Trading Examples
Some traders identify a hidden divergence and jump into the market immediately. But I find it more useful to think of a hidden divergence as an alert for possible continuation setups.
Once the alert is issued, we can start looking for continuation trade entries. Short-term bar patterns are helpful at this stage.
Trading Tips And Review
As we’ve pointed out, when marking hidden divergences, the choice of the first swing pivot is critical.
Choose a solid pullback swing that stands out on the chart. It leads to a more reliable RSI hidden divergence. Don’t choose a meandering sideways consolidation.
If you review the examples above, you’ll find a few regular divergences as well. Regular divergences point to reversal, while the hidden ones get you into pullbacks. Such conflicting signals present a problem for our analysis.
But unless other factors support a reversal, give more weight to hidden divergences. (Examples of reversal factors are climactic volume, significant support/resistance, and prolonged congestion.)
Finally, let’s wrap up by reconciling the standard RSI strategy with the hidden divergence.
Recall the standard oversold and overbought RSI strategy. When the RSI falls below 30, we buy; when the RSI rises above 70, we sell. This basic strategy uses arbitrary levels of 30 and 70.
Think of the hidden divergence approach as necessarily the same strategy.
However, instead of 30/70, we use oversold and overbought levels implied by the first swing pivot. (For instance, in Example #1, we were using RSI value 55 as the oversold level.) Hence, this approach seeks to adapt to current market conditions.
If you want to learn more about hidden divergences, check out this review on the MACD Hidden Divergence.
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Perfect play BTC bounce from the area
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35% bounce
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BTC hit $43k