In our previous lesson, we explored regular divergences, which are commonly used to spot potential trend reversals. Now, let’s dive into a more subtle yet powerful concept — hidden divergence.
📌 What is Hidden Divergence?
Hidden divergence serves as a signal for trend continuation rather than reversal. While regular divergence helps you catch tops and bottoms, hidden divergence helps you ride the trend longer by signaling that the current trend is still healthy.
As traders say, “The trend is your friend — until it ends.” Spotting hidden divergence lets you stay friends with the trend a little longer.
✅ Types of Hidden Divergence
🔼 Hidden Bullish Divergence
Occurs when:
- Price forms a higher low (HL)
- Oscillator forms a lower low (LL)
This typically shows up in an uptrend. The market dips slightly, forming a higher low, but the oscillator (like RSI, MACD, or Stochastic) drops even further — creating a mismatch.
Interpretation: The uptrend is still strong, and the dip is likely just a temporary pullback — a potential buying opportunity.
🖼️ Example: Hidden Bullish Divergence on an Uptrend Chart
🔽 Hidden Bearish Divergence
Occurs when:
- Price forms a lower high (LH)
- Oscillator forms a higher high (HH)
This setup is spotted during a downtrend. Even though the oscillator pushes to a new high, the price fails to do so — suggesting underlying weakness.
Interpretation: The downtrend remains intact, and the recent bounce may be short-lived — a potential opportunity to sell or short.
🖼️ Example: Hidden Bearish Divergence on a Downtrend Chart
📊 Summary: Regular vs Hidden Divergence
| Type | What It Signals | When to Use |
|---|---|---|
| Regular Divergence | Possible trend reversal | Great for spotting tops & bottoms |
| Hidden Divergence | Possible trend continuation | Ideal for trend followers |
🎯 Final Thoughts
Hidden divergences are powerful tools for confirming trend strength. If you’re a trend trader looking to enter on pullbacks, recognizing hidden divergence can help you jump in early — with lower risk and higher reward potential.
Keep practicing and train your eye to spot them — they’re not as hidden as they sound once you know where to look!
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