Perfect Divergence Full
Divergences are imbalances between the action of the price and the action of an indicator. They occur when prices mark highs or lows in a defined direction, while the indicator presents them in the opposite direction to what we see in prices.
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Thanks to the Perfect Divergence indicator, detecting a divergence is very easy. If the price is reaching new highs, then the indicators should also be recording higher highs. On the other hand, if the price is falling, the indicators should follow that downtrend. If the price and indicators are trending in opposite directions, then we have a divergence.
In this indicator you can locate the divergences of 21 different indicators:
- Accelerator Oscillator
- Accumulation / Distribution
- ADX (Average Directional Index)
- ATR (Average True Range)
- AO (Awesome Oscillator)
- Bears Power
- Bulls power
- CCI (Commodity Channel Index)
- Force Index
- Money Flow Index
- OsMA (Moving Average of Oscillator)
- OBV (On Balance Volume)
- RVI (Relative Vigor Index)
- Standard Deviation
- Stochastic Oscillator
- RSI (Relative Strenght Index)
- Williams Percent Range
Types of divergences:
The best known divergences, or 'regular' divergences indicate that the trend is weakening and there is a good chance it will change.
That is, they allow us to anticipate a possible change in trend. They can be of two types: bullish or bearish.
- Bullish divergence: In downtrends, you will find a bullish divergence when you see the lows of the indicator rise while the price marks new lows. This bullish divergence indicates that there is some force wanting to lift the price and that it may get there soon.
- Bearish divergence: In bullish trends, you will find a bearish divergence when you see that the highs of the indicator are lower than those marked previously, while the price marks new highs. This bearish divergence tells you that the price is likely to collapse, as some of its components are already doing so.
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