RSI hidden divergence trading rules for retail investors

RSI Hidden divergence trading strategy for retail investors

In this blog, we will discuss the top 10 RSI hidden divergence trading rules which will help retail investors to select stocks based upon divergence trading


RSI hidden divergence trading rules

Rule 1

  • Divergence Trading is only successful for a longer time e.g. 1 day

Rule 2

  • Divergence can be plot only when stock follows these rules.
  • The stock should make a higher high than previous high
  • Lower lows than the previous low
  • Double top
  • Double Bottom

Rule 3

  • Set time frame to daily or weekly

Rule 4

  • Use RSI Indicator for analysis

Rule 5

  • Connect Previous high and new high using the line tool
  • Select the RSI Indicator set it to daily time frame
  • Connect RSI Previous high and new high using the line tool
  • If you find the difference between them is a hidden divergence

Rule 6

  • Connect Previous low and new low using line tool
  • Select the RSI Indicator set it to daily time frame
  • Connect RSI  Previous low and new low
  • If you find the difference between them is a hidden divergence

Rule 7

  • Divergence can be identified using different indicators like MACD or stochastic.

Rule 8

  • You should enter the trade at the bottom or at the top.

Rule 9

  • When you identify double top or bottom check the divergence to confirm the trade

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1 Comments

  1. Hi, as per my knowledge diversion work if RSI over bought and over sold ?
    please correct if i am wrong,

    Regards
    Vijay

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