It is possible for a divergence to be “negated” – which happens when price continues to move in its direction (i.e. in the direction of the major trend) despite a divergence. So often price can negate a divergence (e.g. a or divergence). This can happen quite a lot in strong trends with momentum.
Due to the numerous divergences that can occur on charts (often with many false signals or whipsaws) – it can be better to use divergence in combination with other methods to increase the probabilities. For example, combining divergence with other trend reversal chart techniques such as: trendline breaks, moving average crossovers, break of support or resistance, or oscillators like or etc.
The red divergence colour can indicate a potential , blue divergence colour can indicate a potential divergence. The indicator can also warn of potential divergences developing – so a magenta warning can indicate a potential and a yellow/orange warning of a potential divergence.
The pro divergence indicator incorporates green and blue dots to show when and stochastics is oversold or overbought. The overbought/oversold is shown as dark blue dots – and the stochastics overbought/oversold is shown as green dots. This is added as an extra feature to add further information to the divergence signal. The momentum used in the indicator is the .
The indicator can be used on the charts of the majority of markets (e.g. stocks, indices, ETFs, currencies, cryptocurrencies, precious metals, etc.) and any timeframe. It should be noted that the degree of noise and randomness increases significantly on lower timeframes. So the lower the timeframe that is chosen (e.g. 15-min or lower) the greater the degree of noise and randomness and therefore the higher the frequency of false signals or whipsaws.
Chartists should be aware of the probabilistic and uncertain nature of price action and the markets, and therefore prepare to limit and control any potential risks.
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