RSI divergences: do you still use them?
Price makes a new high, RSI doesn't — the classic bearish divergence. It's taught everywhere and fails everywhere, which is why traders either abandoned it or learned strict conditions for when it works.
What's your verdict?
- the conditions under which divergence works for you
- how you avoid calling tops in a strong trend
- whether you use hidden divergence too
The RSI guide covers regular and hidden divergence and their failure modes.
Background: The RSI indicator explained: overbought, oversold and divergence
The Relative Strength Index measures how strong recent moves have been. How it is calculated, what 70 and 30 really mean and why RSI can stay extreme in a trend.
What does RSI above 70 mean?
That recent gains have been strong compared with recent losses. It is called overbought, but in a strong uptrend the price can keep rising while RSI stays above 70.
What is the best RSI setting?
The standard is 14 periods, as Wilder proposed. Shorter settings react faster with more false signals; longer settings are smoother. There is no single best setting.
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