What is a regular divergence?
A regular divergence is used as a possible sign for a trend reversal.
Think of it this way: The trend has been running a marathon, and regular divergence is the moment it starts gasping for air. The legs are still moving, but the energy is fading.
There are two types of regular divergences: bullish and bearish.
But before we break those down, let’s talk about why divergence happens in the first place. Understanding the mechanics will help you read these signals with confidence instead of just hunting for patterns on your chart.
Why Does Divergence Happen?
It all comes down to momentum.
Oscillators like RSI, MACD, and Stochastic don’t just track which direction the price is moving. They measure the strength and speed of that movement.
RSI, for example, compares the size of recent up-moves against recent down-moves over a set period (usually 14 candles).
So it’s not asking “Did price go up or down?” It’s asking “How enthusiastically did it move?”
That distinction is important.
Let’s say a currency pair drops from 1.3000 to 1.2900 in a strong wave of selling. Big red candles, heavy volume, lots of momentum. The RSI plunges. Then price pulls back slightly and drops again, this time reaching 1.2850, which is a new lower low.
But that second drop was slower. The candles were smaller. Fewer traders were participating. Price technically went lower, but it got there with less conviction.
The oscillator picks up on that.
Even though the price hit a new low, the RSI registers a higher low because the selling pressure behind the move was weaker. That mismatch between what price is doing and what the oscillator is measuring is your divergence.
This is why divergence can act as an early warning system. Price is still making new extremes, but the fuel behind those moves is running out. And when fuel runs out, reversals often follow.
Now let’s look at the two types.
Regular Bullish Divergence
If the price is making lower lows (LL), but the oscillator is making higher lows (HL), this is considered to be regular bullish divergence.
This normally occurs at the end of a downtrend.
After establishing a second bottom, if the oscillator fails to make a new low, the price will likely rise, as price and momentum are normally expected to move in line with each other.
In plain English, price is screaming, “We’re going lower!” but the oscillator is whispering, “Ehh, I don’t think so.”
When they disagree like this, trust the oscillator’s instinct. Momentum is drying up, and a bounce could be on the way.
Regular Bearish Divergence
Now, if the price is making a higher high (HH), but the oscillator is making a lower high (LH), then you have regular bearish divergence.
This type of divergence can be found in an uptrend.
After the price makes that second high, if the oscillator makes a lower high, then you can probably expect the price to reverse and drop.
Think of it like a basketball player going up for a dunk. The first jump was explosive.
The second jump? Still gets air, but not as much.
The crowd (a.k.a. the oscillator) can tell the player is running out of bounce, even if the scoreboard (a.k.a. price) says they scored again.
The Big Picture
As you can see, regular divergence is best used when trying to pick tops and bottoms. You are looking for an area where the price will stop and reverse.
The oscillator signals to us that momentum is starting to shift, and even though the price has made a higher high (or lower low), chances are that it won’t be sustained.
A quick word of caution: “picking tops and bottoms” sounds glamorous, but it’s also one of the riskier things you can do as a trader. Regular divergence improves your odds, but it doesn’t guarantee a reversal. Sometimes price will keep pushing in the same direction and ignore the divergence completely.
Always look for additional confirmation (like key support/resistance levels or candlestick patterns) before pulling the trigger.
What’s Next?
Now that you’ve got a hold on regular divergence, it’s time to move on and learn about the second type of divergence… hidden divergence.
Don’t worry, it’s not super concealed like the Chamber of Secrets, and it’s not that tough to spot. The reason it’s called “hidden” is that it’s hiding inside the current trend.
We’ll explain more in the next lesson. Read on!