What is RSI Divergence Positive and Negative

Everyone who actively working in stock market as a investor or trader know about relevance of the RSI in technical analysis. But only few people know about the divergence of the RSI  and its uses, importance to take the decision in the buying and selling of the stock.

We at ISFM, Stock Market School – Gurgaon, Explaining RSI divergence in very simple language.

What is Divergence :

Divergence occurs when an indicator and the price of an asset are heading in opposite directions.

Its having two types :

1. Positive divergence : When price of a security is going low but RSI is going upside, its showing positive symbol and confirm that securities is bottom out. So we can cover our short postion and wait for buying signal here.

2. Negative divergence :Its happens when the price of a securities is in an uptrend and RSI is going in down side. It is clear signal that stock price can go down in coming future so we should book our profit and wait for price reversal in the market.

Conclusion: It is very rare case when you will find the such kind of the opportunity but it is sure when you will search such symbol it going to help you a lot in the market to earn the big profit in trading. So keep watch the reverse action of the price and RSI in the market.