Divergence is when the price of an asset is moving in the opposite direction of a technical indicator, such as an oscillator, or is moving contrary to other data. A divergence can be used as a signal that a change in trend may be imminent.For example, if the price of a security is trending higher while the oscillator reading shows that momentum is waning, this could be interpreted as a sign that the uptrend may soon come to an end. Conversely, if prices are falling while indicators suggest that buying pressure remains strong, this could indicate that there may be further downside ahead for the security.It's important to note however, that divergences should not be relied upon exclusively when making investment decisions; they should only serve as one piece of information among many when assessing market conditionsWhen divergence occurs it can be seen as a sign that the market may be about to change directions. Oscillators are used by traders to help identify overbought and oversold conditions in the market. When these indicators reach extreme levels it can be interpreted as a sign that a reversal may be imminent. Divergence between an oscillator and price can sometimes provide confirmation that this reversal is taking place.
