Divergence Trading Explained For Beginners | Technical Analysis | IIFL Securities

Divergence Analysis aids you in making sense of data when a stock price and a technical indicator are telling you different things.


Today we will break down a common technique of technical analysis called Divergence Analysis. Divergence Analysis helps you make sense of charts where the price and an indicator are telling you different things.
Let’s take an example of Company ABC whose price is reaching new highs.
This can be a signal that the price is on an upward rally
Looking at this signal investors can take a long position.
But Investors, always check technical indicators alongside price trends while trading
These indicators are available on the IIFL platforms.
One such indicator is the Relative Strength Index - and this indicator tells a different story
As stock price reaches new highs, RSI can touch lower highs
This is a negative divergence. It could suggest that the price is about to reverse and fall
A positive divergence happens when a price movement is touching lows but a technical indicator is moving in the opposite direction.

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Time Stamp:
00:00 - Intro | IIFL Securities
00:04 - What is divergence analysis?
00:17 - Understand with example
00:48 - How to identify negative divergence?
01:00 - How to identify positive divergence?
01:09 - Closing remark

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