Which types of divergences are commonly used in cryptocurrency trading strategies?

3 answers

• Malasamudram suhela ThasleemMar 03, 2021 · 4 years ago
  Divergences play a crucial role in cryptocurrency trading strategies. They are used to identify potential trend reversals and generate buy or sell signals. There are several types of divergences commonly used, such as bullish and bearish divergences. Bullish divergences occur when the price of a cryptocurrency makes a lower low, but the corresponding indicator makes a higher low. This suggests that the selling pressure is weakening and a bullish reversal may be imminent. On the other hand, bearish divergences occur when the price makes a higher high, but the indicator makes a lower high. This indicates that the buying pressure is weakening and a bearish reversal may be on the horizon. Traders often use indicators like the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD) to identify these divergences and make trading decisions accordingly. However, it's important to note that divergences are not foolproof indicators and should be used in conjunction with other technical analysis tools for better accuracy.
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• Cardenas SimonsenJan 28, 2025 · 7 months ago
  When it comes to cryptocurrency trading strategies, divergences are widely employed by traders to spot potential trend reversals. One commonly used type of divergence is the hidden divergence. Hidden divergences occur when the price of a cryptocurrency makes a higher high or lower low, but the corresponding indicator fails to confirm the move. This suggests that the prevailing trend is likely to continue. For example, if the price of a cryptocurrency makes a higher high, but the indicator makes a lower high, it indicates a hidden bearish divergence, implying that the downtrend is likely to persist. Conversely, if the price makes a lower low, but the indicator makes a higher low, it indicates a hidden bullish divergence, suggesting that the uptrend is likely to continue. Traders often use oscillators like the Stochastic Oscillator or the Relative Strength Index (RSI) to identify hidden divergences and make informed trading decisions.
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• Alex BrelandJul 17, 2020 · 5 years ago
  In cryptocurrency trading strategies, one commonly used type of divergence is the convergence divergence. Convergence divergences occur when the price of a cryptocurrency and the corresponding indicator move in the same direction. This suggests that the prevailing trend is strong and likely to continue. For example, if the price of a cryptocurrency makes a higher high, and the indicator also makes a higher high, it indicates a bullish convergence divergence, implying that the uptrend is strong. Conversely, if the price makes a lower low, and the indicator also makes a lower low, it indicates a bearish convergence divergence, suggesting that the downtrend is strong. Traders often use indicators like the Moving Average Convergence Divergence (MACD) or the Average Directional Index (ADX) to identify convergence divergences and make trading decisions based on the strength of the trend.
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