Liquidity Theory
LessonsCourse 2: Building Your Toolbox › Trading Tools
Course 2: Building Your Toolbox · Trading Tools

Divergences

Module 4 · Session 5
Open the interactive lesson →
Introduction

When Price and the Oscillator Disagree

A divergence occurs when price action and an oscillator tell different stories. Price makes a new high or low, but the oscillator fails to confirm it. This disagreement is a leading signal — it suggests that the momentum behind the move is weakening even though price hasn't reversed yet. There are two families: Regular Divergences (signal reversal) and Hidden Divergences (signal continuation).

Lesson

Regular and Hidden Divergences — Reversal vs Continuation

Regular divergences signal trend exhaustion and potential reversal. Hidden divergences signal trend continuation after a retracement. Understanding which family a divergence belongs to is critical — acting on a hidden divergence as if it were a regular divergence (or vice versa) produces the wrong trade direction entirely.

Check Yourself

On a 4H chart, price makes a new Higher High. At the same time, the RSI oscillator makes a Lower High compared to the previous peak. The setup appears at a known resistance zone. What type of divergence is this and what does it signal?

Answer it (with a live chart) in the interactive lesson.

Start this lesson in the app →
Liquidity Theory · Learn · Analyze · Trade together
Educational content only — trading involves substantial risk and most beginners lose money. Nothing here is financial advice.