Divergence - Lesson 4
Divergence is usually associated with oscillator indicators. Oscillators measure the position of the current data for a specific factor (such as price, momentum or volume) relative to the total range of said factor for a specified number of historical bars on a bar chart. The calculation for oscillators takes various factors into account. A situation in which the calculation of an oscillator results in peaks that are trending lower, while the price action of the underlying security is exhibiting peaks that are making new highs with every price swing, indicates that each new high achieved by the underlying price is getting weaker in terms of the factor that is measured by the oscillator. On an appropriate price chart, a display of negative divergence will appear.
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