Price forms a higher high, but RSI forms a lower high.
Subsequently, the price is expected to decrease.
Important note: Bearish divergence at a peak often lasts longer than bullish divergence at a bottom. This is because peaks are driven by greed, while bottoms are driven by fear. Greed is an emotion that can persist over a longer period, whereas fear tends to be short-lived. In other words, the formation of a peak takes longer than the formation of a bottom.
Many amateur traders often appear overly excited or eager to trade based on divergence between price and RSI. However, the advice is to wait for confirmation from price action. The example on the VN-Index demonstrates prolonged peaks and often smaller divergences (pink boxes) within the larger divergence. It is advisable to wait for price to break pattern formations such as flags, triangles, etc., before initiating trades.
Subsequently, the price is expected to decrease.
Important note: Bearish divergence at a peak often lasts longer than bullish divergence at a bottom. This is because peaks are driven by greed, while bottoms are driven by fear. Greed is an emotion that can persist over a longer period, whereas fear tends to be short-lived. In other words, the formation of a peak takes longer than the formation of a bottom.
Many amateur traders often appear overly excited or eager to trade based on divergence between price and RSI. However, the advice is to wait for confirmation from price action. The example on the VN-Index demonstrates prolonged peaks and often smaller divergences (pink boxes) within the larger divergence. It is advisable to wait for price to break pattern formations such as flags, triangles, etc., before initiating trades.
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