Indicators
Divergence
Price makes a new high or low but the indicator does not, showing the new extreme came with less force. A warning to wait for confirmation, not an entry by itself.
In practice
EUR/USD makes a higher high at 1.1100, but RSI makes a lower high than it did at the previous price peak. Price went up while momentum went down — bearish divergence, a warning that the new high may not hold.
Why it matters for traders
Divergence is one of the earliest warnings of a tired trend, often appearing before any price reversal, which makes it valuable for timing exits and avoiding late entries. But it is a caution signal, not a trigger — acting on divergence without a confirming price reversal is a classic way to get stopped out by a trend that simply keeps going.
Common pitfall
The pitfall is acting on divergence the moment it appears, then getting stopped out as the trend simply continues. Divergence is a warning, not a trigger, and can persist across many candles in strong trends. Wait for a confirming price reversal — a break of structure or a reversal pattern — before acting. Also ensure the divergence is clear on a higher timeframe; minor divergences on a 5-minute chart are usually just noise.
Lessons that use this term
- SMT divergence
Reading divergence between two correlated instruments when one fails to confirm the other's high or low.
Related terms
Trade Forex, Metals & Crypto with Exness
From 0.0 pips on Raw Spread / Zero accounts (commission applies). E-wallet withdrawals typically process within minutes; cards and bank wires usually take 3–5 business days. No deposit fees. Regulated across multiple jurisdictions.
Spreads may fluctuate and widen due to factors including market volatility, news events, market open/close, and others. Processing times may vary depending on the chosen payment method.
Danipips Blog