Bull and Bear trends have become commonplace for traders when trading. However, there are many types of trend conditions, one of which is divergence conditions. This time we will discuss what bullish divergence is, which we will learn from the definition to some questions that traders often ask about divergence itself. Bullish Divergence is a condition when a new low occurs, but the indicator usually has not reached the new low. This Bullish divergence can also be interpreted as a trading signal that is getting weaker. For more details about what Bullish Divergence itself is, you can understand it through the article below. But before that, you can do the Preliminary Test from GIC to find out how far your talent is in trading.

What Does Bullish Divergence Mean?

Bullish divergence, also known as convergence, is a situation in the market where the price is forming a point at a lower low. And at the same time, the selected indicator will have a higher low position. This condition can be said to be the first signal that the trader should bet on the ongoing upward rally. You also need to know that these indicators are used to predict a price direction. That way, if there is an indicator that will move up, then it means that the price must also go up. Bullish divergence is, in essence, the opposite of the bearish signal itself. Despite its ease of use and its power in general information, trading oscillator indicators tend to be somewhat misunderstood in the trading industry, even considering their close relationship with momentum. At its most basic level, momentum is actually a means of assessing the level of relative greed or fear in the market at a given point in time. Before continuing to discuss what indicators can be used in this divergence condition, you can join GIC Affiliate to become an IB and get various bonuses to additional income along with other benefits when trading on GIC.

Indikator Divergence

Setelah mengetahui apa itu bullish divergence tersebut, kali ini kita akan mempelajari mengenai indikator apa saja yang bisa digunakan ketika dalam keadaan divergence ini. Indikator tersebut adalah:

Relative Strength Index (RSI)

Relative Strength Index or commonly abbreviated as RSI is one of the indicators in technical analysis that is usually used by traders in measuring the amount of price volatility in an asset being traded. This indicator can also be used to evaluate whether the asset can be said to be in an overbought or oversold position. This RSI will be displayed as an oscillator, which is a graph that moves between two extreme points with values ​​between 0 and 100. This indicator was originally developed by J. Welles Wilder Jr. Then introduced in his book in 1978, entitled New Concepts in Technical Trading Systems. This indicator has been widely used by traders and technical analysis experts, because RSI is used to measure changes in asset prices with a period of 14, namely, 14 days for daily charts, 14 hours for hourly charts, etc.

Moving Average Convergence Divergence (MACD)

In the 1970s, Prof. Gerald Appel developed a technical indicator in trading called Moving Average Convergence Divergence or abbreviated as MACD, which has become the most powerful weapon for traders. This indicator can be used to confirm the strength and direction of a trend, and can also be used to determine a reversal point. In addition, this MACD indicator can also provide information to traders about whether the ongoing trend is strong enough or not. Because this MACD indicator is very easy to interpret and confirm, this indicator will be very suitable for use by anyone, both beginners and experienced. Therefore, many traders consider this MACD indicator as the most efficient technical indicator and can also be relied on by anyone. In general, the Moving Average Convergence Divergence (MACD) indicator can be used for:

  1. Measuring momentum in the market, whether the condition has experienced overbought or oversold.
  2. Can see whether the current market conditions are experiencing bullish or bearish divergence.
This function has become quite popular because the results can be very accurate if the signal can occur simultaneously with the existing market momentum, namely, overbought or oversold.

Stochastic Oscillator

Stochastic Oscillator is a momentum indicator that can be used to compare the closing price of an investment, be it stocks or crypto assets, with its price range over a specified time period. The sensitivity level of this indicator to market movements can be reduced by adjusting it to a specified time period or by taking a moving average of the results. The Stochastic Oscillator indicator is usually used to find out about overbought or oversold trading signals by utilizing its value range which is limited from 0-100. Discovered by George C. Lane in the 1950s, the Stochastic Oscillator is one of a handful of indicators or metrics that have been used by analysts and traders to predict a potential reversal.

Instead of being used to measure a price or volume, this indicator can actually be used to compare the latest closing price with the range in a specified period. The common and commonly used period for this indicator is 14 days. However, users can adjust the time span to meet the desired analytical needs. The way to use this Stochastic Oscillator is by subtracting the lowest price in the specified period from the current closing price that is happening. Then you can divide it by the total range for that period, which you then multiply by 100. And compare the current price with the range that occurs from time to time. So this indicator can function to display the consistency of an asset by knowing the price that has closed, namely, near the highest price or the lowest price recently. After learning about what indicators can be used when the divergence condition itself, you can apply it to your trading. But before that, make sure you also trade on GICTrade by downloading the application on the Play Store or App Store on your Smartphone.

Pattern & Contoh Chart Divergence

There is a pattern of the divergence pattern itself. This time we will study the pattern along with case examples that you can understand below. The types of patterns are:

Hidden Divergence

Hidden Divergence is a perfect companion pattern used for Regular Divergence because it can identify Continuation movements in the current trend. This divergence is hidden when an oscillator makes a high or low price while the price action does not. This is very common in an existing trend and usually indicates that there is still strength in the existing trend and the trend will continue. This hidden divergence is similar to a continuation pattern. Like regular divergence, this hidden devergence can be bullish or bearish. Here is an example of a hidden divergence case itself.

$NVDA menunjukkan divergensi bullish yang tersembunyi di grafik saham ini

The NVIDIA chart above is an example of a hidden bullish divergence. If it is making a lower low then the trend is up. However, if the indicator you are analyzing is making a lower low then it will have a “hidden” divergence. So this can tell you that the price is trending up with a higher low but has temporarily lost momentum or is oversold in the recent market. This can give you a great entry opportunity into the major trend.

Regular Divergence

This regular divergence is actually divided into two categories of divergence, which are regular bullish divergence and also regular bearish divergence. Both will have an important role in indicating a price reversal event. This regular bullish divergence will occur when the actual price of a crypto asset will show the lowest low position when compared to the highest low position that has been shown by the indicator used.

Divergensi Tersembunyi vs Divergensi Reguler

In the chart above, you can see some examples of regular MACD divergence. Regular divergence is measured from the lows of price and the indicator during a downtrend, and from the highs of price and the indicator during an uptrend. Starting from the left, price makes lower lows while the MACD line makes double bottoms. Next, price makes double tops while the histogram makes lower highs. Finally, price makes three consecutive higher highs while the histogram makes three consecutive lower highs. If you are still confused about trading itself or the various patterns that exist, you can take the Trader Assessment survey to be able to consult about trading at GIC.

How to Recognize Bullish Divergence Patterns

To understand this bullish divergence pattern, it can be seen from the candlestick chart that has formed a bullish engulfing pattern with the last three candlesticks, namely usually there are two bearish candlesticks and closed with one bullish candlestick with a closing price higher than the previous day's opening price. This pattern is a form of bullish divergence with the characteristic that the last valley on the candlestick is lower than the previous valley, while on the MACD the opposite occurs, namely the last valley is higher in position than the previous valley. From both patterns, it can be seen that there has been resistance between demand and supply. People tend to be tired of taking selling action so that there is a tug-of-war movement and in general terms it is called price consolidation. the price will show a clear downward trend, while the RSI indicator will rise. This means that even though the price may fall, market sentiment will start to strengthen. If you are still confused about how to find out the existence of the bullish divergence pattern on the crypto asset chart, then here are some factors that you need to understand before you can enter the crypto asset market.
  1. A chart that will work on two variables is the main factor to be able to see divergence. There are many indicators that you can use to find out, such as the Relative Strength Index (RSI) indicator or other indicators that have been explained above.
  2. Look for situations when the RSI or other indicators have shown a trend reversal, such as from a downtrend to an uptrend.
  3. Then, you can find and also analyze the appropriate area on the chart and also find signs of divergence such as the highest price in the market which will be followed by the highest price which will be slightly higher.
  4. Traders should also be aware of price actions that may differ and cause a divergence pattern.

Difference with Bearish Divergence

There is a difference between bull and bear trends in the divergence pattern itself. You can understand the difference from the writing below.

Divergensi Bullish

Both divergences look for “disagreements” between the technical indicator you are using and the price action itself. In the case of a bullish divergence, the signal will occur when the indicator has made a higher low (becoming less bearish) while the price action itself has made a lower low. The indicator is a more reliable representation of investor sentiment and suggests that the market is overextended or “oversold” to the downside.

Divergensi Bearish

"Disagreement" in this signal occurs when the indicator makes lower highs while price completes higher highs. The indicator in this case suggests that investors are becoming less bullish and therefore the market is over-exerting itself or "overbuying" upwards. Before moving on to the questions commonly asked by traders regarding bullish divergence itself, it would be a good idea for you to take the time to fill out the user satisfaction survey regarding GICTrade services so that later we can maximize the existing advantages.

Bullish Divergence Related Questions

Here are some questions that traders often ask regarding divergence itself. These questions are:

What is the Target Movement of Bullish Divergence?

As mentioned earlier, the condition when bullish divergence occurs is the first signal that traders should bet on the existing upward rally. You need to know that this indicator is used to predict a price direction. So, if the indicator will move up, it means that the price must also go up. A crypto asset can be considered to be experiencing bullish divergence if at that time the price has made a lower low on the previous chart, while the indicator will provide a higher low later. After this bullish divergence pattern occurs, the price of the crypto asset will definitely tend to increase rapidly.

How is Forex Volume during Bullish Divergence?

You can see this forex volume as explained above, but you can also use tools from indicators such as the On-balance volume (OBV) indicator. Another useful tool for seeing divergence is the OBV to see that balanced volume is a momentum indicator that links volume to price changes. OBV shows if market volume is flowing into or out of a security or stock divergence occurs when price movement is not confirmed by the OBV.

What is Exaggerated Bullish Divergence?

Exaggerated bullish divergence will later show you two lows at roughly the same level. However, this indicator will show a slightly different picture. The second low will be slightly higher than the first low. Exaggerated bullish divergence is also not much different from the regular bullish divergence that we have learned before, both types of patterns will show a signal that there will be a reversal of direction regarding a trend, when these patterns will appear at the end of the market trend.

What is Bullish Stock Divergence?

No different from bullish divergence in crypto, the only difference is the type of instrument that you will invest or trade such as in the form of stocks, crypto, forex, or other instruments. Divergence is a condition that can occur when trading, therefore for any instrument it will not be different unless the conditions or patterns are different. This Bullish Divergence pattern will be very useful for you if you study it so that when conditions such as those explained above occur, you can determine how to position or trick to get profit from the pattern that is happening. You can also learn other patterns in the GIC Journal besides this bullish divergence. Because in doing a trade, of course you have to understand the various patterns or conditions that exist so that you don't get caught up in the event and cause your trading to lose without any preparation or knowledge. In addition to trading, you can also increase your income by inviting friends or people closest to you and joining GICAffiliate so that you can get additional income for free.