This article has been translated from English to Gen Z Slang.
Divergences are like your low-key friends - always there to tell you when a trend's about to ghost you. 👀 They help you figure out if a trend is getting weaker, so you can tell if it's about to flip the script or just vibe. 💃🔄
But before you start flexin' and looking for these divergences, here are nine sick rules to help you trade like a boss.
Learn 'em, memorize 'em (or just bookmark this page, duh), and use them to level up your trading game. 📈
Ignore them? Ugh, that's a one-way ticket to Brokesville. 🛑💀
1. Make sure your glasses are clean 😎
Listen, if you wanna peep a divergence, the price's gotta have done one of these glow-ups:
- Higher high than before
- Lower low than the last one
- Double Top
- Double Bottom
If none of these have happened, don’t even bother with the indicators 'cause you're just trippin’. 🎢
Not a divergence, bud. It's like thinking you saw your crush in the crowd – get your eyes checked. 😂
2. Draw lines on successive tops and bottoms 🖊️
Now that you've spotted some vibes (price vibes, that is), give it a look. You'll only see one of these four magic tricks: a higher high, a flat high, a lower low, or a flat low.
Connect the peaks and troughs, fam. Remember, it has to be across the major highs/lows like connect the dots with a twist. 🎨
If there are tiny hiccups or dips between, just ignore like you would a cringy text from your ex. 😆
3. Connect TOPS and BOTTOMS only ⬆️⬇️
Once two swing highs are in town, you’re connecting TOPS like a savvy internet connect. For the lows, connect those BOTTOMS too. 💃
4. Keep Your Eyes on the Price 👀💸
So, you've connected those tops/bottoms with a trend line. Now peep your go-to technical indicator and vibe-check it against the price moves. 📊
Compare the tops and bottoms of your indicators, fam. With things like MACD or Stochastic, don't sweat if they're mingling too much. You do you. 🙌
5. Be Consistent With Your Swing Highs and Lows ⬆️⬇️
When you draw lines hooking up the highs, you’ve gotta do the same for the indicator. No ghosting allowed! Low lines gotta match too. ✅
If lines are chillin’ on the lows, make sure the indicator’s lows are coming along for the ride. #matchymatchy
6. Keep Price and Indicator Swings in Vertical Alignment
Those highs or lows in the indicator? They gotta match VERTICALLY with the price swings. It’s like picking the right kicks for the perfect fit, gotta match! 🥳
Keep that vertical alignment on point between the PRICE and the INDICATOR. Alignment game strong. 💥
7. Watch the Slopes ⛰️
Divergences are a go if the SLOPE of the line connecting indicator tops/bottoms is different from that line connecting price tops/bottoms. Be it, ascend (climbing), descend (falling), or flat (stay chill).
Peep the two examples above: the "pink" one shows the glow-up - price making a lower low while the indicator says higher low, slopes doin' their own dance. The "blue" example, though, isn't about that divergence life. 😏
8. If the ship has sailed, catch the next one. 🚢
You spot a divergence but the price already hit the road? It's played out fam; you missed the party. 🎉 But don't trip, just wait for the next swing and get lit on that new divergence grind.
9. Take a Step Back ⏪😌
Divergence is bae on longer time frames 'cause it's less messy. Fewer false alarms. 🙌
Less hype, but if you play your cards right, the gains can be fire. 🔥
Short time frame divergences pop up more but they’re iffy 😬. Stick to 1-hour charts or longer. That’s the way to go, my dude.
Others roll with 15-min charts or even faster, but tbh, that's way too much tea for us. We’re chill. 🤙
So there you have it! 🎉
Nine rules you MUST (or just really really should?) follow to slay at divergence trading. ⚔️📊
Trust us, if you skip them, your account's gonna get more hits than BabyPips.com’s Facebook page. 😂
Stick to the game plan, and you’ll def boost your chance of catching those sweet, sweet profits. 💸
Now go flex those charts, spot past divergences and become the divergence Houdini you were born to be! 🔍✨