Educational (divergence + volume)
Hi guys, in order to spot a divergence you should be careful which timeframe you're looking at. for example in the left picture, the daily timeframe is showing higher highs in price (at each candle) and lower highs in RSI (at each candle). but note that these are not highs and lows and as long as you can't find signs of accumulation and distribution in highs and lows (as long as there's no valid consolidation) you can't name them as highs and lows. so there's no divergence. but in the lower time frame (what is shown is 4h) you can see it more clearer that for every candle in the daily time frame, you have a specific trend in the 4H timeframe. so you can name them as highs and lows and yes, there is a divergence now.
also, keep in mind that in the lower timeframe. every time you're making a new high in rsi, you should expect it to be more volatile and be more sensitive in a way that in the next new rsi high, you have less time spent in the overbought area.
The next part is about the volume profile. you have less resistance in front of the price movement where there is less volume traded in the past. BUT NOT ALWAYS!
less trades made in the past in an area means two things:
1- you can expect the price to move faster and sharper and take less time in that area
2- if the price wants to make a low or high or a pattern, it's less predictable and there's more chance of wrong analysis and fake patterns.
Feel free to leave any comments and ask questions!
also, keep in mind that in the lower timeframe. every time you're making a new high in rsi, you should expect it to be more volatile and be more sensitive in a way that in the next new rsi high, you have less time spent in the overbought area.
The next part is about the volume profile. you have less resistance in front of the price movement where there is less volume traded in the past. BUT NOT ALWAYS!
less trades made in the past in an area means two things:
1- you can expect the price to move faster and sharper and take less time in that area
2- if the price wants to make a low or high or a pattern, it's less predictable and there's more chance of wrong analysis and fake patterns.
Feel free to leave any comments and ask questions!
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