How to Use Divergence in a High-Probability Way — Tutorial #1

In this tutorial, I explain how to use Wide and Tight Divergence in a structured and practical way.

WHAT IS DIVERGENCE?

Divergence occurs when price makes a new high/low while momentum indicators move in the opposite direction. This signals weakening momentum and a potential reversal or correction.

WHY DOES DIVERGENCE WORK?

Divergence exposes momentum weakness before price actually reverses. It helps traders identify exhaustion early, improving accuracy and timing.

TWO MAIN TYPES OF DIVERGENCE

1.) WIDE DIVERGENCE
Price forms a large, extended swing while the indicator creates a smaller swing in the opposite direction. This signals strong exhaustion and is often followed by a bigger reversal.

2.) TIGHT DIVERGENCE
Price forms a small higher high or lower low while momentum moves opposite. This reflects micro-exhaustion and often appears before sharp pullbacks.

STEPS FOR WIDE DIVERGENCE

1.) Identify wide swings
Look for a clear extended higher high or lower low compared to recent structure.

2.) Check RSI moving in the opposite direction
This is the initial (unconfirmed) divergence.

3.) Draw a trendline + mark nearest support/resistance zone
These structural levels help filter weak signals.

4.) Wait for a break of both the trendline AND the S/R level
This confirms the divergence.

5.) Drop to a lower timeframe for entry
Use clean price action and break–retest structure to refine entry.

STEPS FOR TIGHT DIVERGENCE

1.) Identify small, shallow swings
Look for minor higher highs or lower lows forming weak structure.

2.) Check RSI moving in the opposite direction
This signals early momentum failure.

3.) Draw a trendline + nearest S/R level
Tight Divergence requires smaller structural zones.

4.) Wait for a break of both levels
A confirmed divergence requires a clean break.

5.) Drop to a lower timeframe for precise entry
Tight Divergence usually leads to fast corrective moves.

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DISCLAIMER:
This post is for educational purposes only and does not constitute financial advice. Trading involves risk, and you should always conduct your own analysis. I am not responsible for any decisions or losses based on this content.