I was reviewing technical analysis strategies and decided to share a very important topic with you—divergence and its different types. This is a powerful tool if you know how to use it correctly.

Basically, divergence is divided into two main categories: regular and hidden. Each has a different mechanism and signals.

Let me start with regular divergence. In this type, you see a clear contradiction between the price movement and the indicator. For example, regular positive divergence occurs when you see lower lows in price but the indicator forms higher lows—this signals that the price is likely to go up. Conversely, with regular negative divergence, when you see higher highs in price but the indicator forms lower highs, it warns that the price may go down.

Hidden divergence is more precise and sometimes harder to detect. Hidden positive divergence occurs when you have higher lows in price but the indicator forms lower lows—this also suggests a potential upward move, but in a different way than regular divergence. Hidden negative divergence, on the other hand, is the opposite: lower highs in price and higher highs in the indicator, indicating a possible downward move.

The truth is, understanding the different types of divergence is what allows you to move intelligently in the market. The difference between regular and hidden divergence is very important because each provides a different message about the strength of the expected move.