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Market Intelligence › Basic Terminologies
Regular and hidden divergence, and their timing problem
Published by The Retail Trader · AUG 06, 2026 · Indicators
The price is making a new high, not a par indicator — this inconsistency is called divergence. He is achy for drawing attention, and almost useless for timing.
Regular divergence is when the price is making a new extreme and the indicator is not able to make it. This is often considered a signal of the trend ending.
Hidden divergence is the opposite — the sentiment did not create a new extreme but the indicator did. This is considered a signal of continuation of the trend.
The biggest issue of divergence is this:
• It can remain profitable for months while the trend continues to rise.
• It can be broken again and again, and looking back only the right one remains.
• Not every divergence becomes a reversal – most do not.
• Different indicators show different divergences, so looking for confirmation is both easy and useless.
Making divergence the reason for a single entry is the most expensive way to read usage. Its main purpose is to ask you to reduce the size of an existing position or tighten the trailing stop – not to take a new extreme position.
This article is for educational purposes only. It is not a buy or sell recommendation, a claim of guaranteed returns, or advisory guidance. Exchanges, SEBI and RBI change rules, rates and procedures from time to time, so verify every figure with your broker or an official source.