Into divergence trading

Friends who have been trading for a while must be familiar with the term divergence trading. The most familiar type of divergence trading is the divergence between indicators and K-lines. Today I will make a special topic on this issue. In general, there are two types of divergence: the first is normal divergence , and the second is implied divergence. The so-called normal deviation is a possible signal of a trend reversal. The implied divergence can be seen as a signal of greater trend continuity. If the price makes a higher low and the oscillator makes a lower low, we call this an implied bullish divergence. Conversely, if an oscillator makes a higher high while making a lower high, we call this an implied bearish top divergence.

There are three main types of divergence. One is the price divergence from the indicator. The second is the deviation between technical and fundamental aspects. The third is the deviation between varieties. In addition, there are deviations between fundamentals and psychological aspects, psychological aspects and technical aspects, and so on. Let me give you a brief introduction to their basic situation one by one.

1. The price deviates from the indicator . That is, the price is at the high/low and the indicator is at the low/high. Common examples include the divergence between price and trend indicators, the divergence between price and trading volume, the divergence between price and oscillator indicators, and so on.

2. The divergence between technical and fundamental aspects. For example, you can see that the trend is in a relatively obvious downward trend on the weekly chart, but the fundamentals show various positive data, so how do you deal with this situation? In this case, either the fundamentals are too optimistic, or the market has exceeded expectations, and it needs to return to a more reasonable range.

3. The divergence of trends among varieties . For example, in the past, you found that the trend of the varieties with strong positive correlation in the past has gradually deviated/or you found that the negative correlation coefficient of the varieties with strong negative correlation in the past has greatly decreased in the near future. If you encounter this situation, you have to think about it. What happened to the logic behind it?

4. Deviation between fundamentals and psychology . If the current overall economic sentiment is relatively optimistic, but considering that the uncertainty of the global new crown epidemic is too high, investors are more cautious, so you will see that some products do not continue to hit new highs, but slowly decline for correction.

5. The deviation between psychological and technical aspects. For example, the retail investor position report shows that the willingness of retail investors to buy is high, but the technical aspect shows that it is falling. So can you smell something? You can regard the sentiment of retail investors as a negative teaching material, and naturally the product trend is opposite to the sentiment of retail investors most of the time. Here is just an example, you can expand and think of more examples.

Deviation from technology is a long-term topic. Today is just a brief introduction. I will make a special introduction later when I have time. I hope that interested friends will continue to pay attention.