What is Divergence?
Bullish divergence: price lower low, indicator higher low. Bearish is inverse.
Formula
Risk: $459 - $452 = $7 per share
Indian market context (NSE)
Reference levels: Nifty 50 at 24,300, Reliance Industries at ₹1,300, Bank Nifty futures at 55,000 (lot size 30). Examples below show how Divergence shows up on Indian index, equity, and futures books — update to live quotes in your journal.
Nifty 50 perspective
Divergence on Nifty (24,300): on the 15-minute chart, combine with session VWAP and 9:15–10:00 liquidity — index divergence signals misfire on expiry Tuesdays without volume confirmation.
Reliance Industries perspective
Divergence on Reliance at ₹1,300: daily vs hourly settings diverge around results and ex-dividend dates; note corporate events in journal when divergence readings spike.
Bank Nifty futures perspective
Divergence on Bank Nifty futures (55,000): first-hour signals differ from post-14:30 behaviour; avoid standalone entries when banking names lead the move.
How to validate
- Forward-test Divergence on paper or sim for two weeks after rule changes.
- Validate only on trades where Divergence settings matched the written playbook.
- Split results by trending vs range weeks on Nifty before trusting the signal.
- Require higher-timeframe bias agreement if that is part of your rule.
How to track in TradeLyser
- Add Divergence reading to trade entry notes (value + timeframe).
- Create tags: “Divergence aligned” / “Divergence ignored”.
- Monthly: filter trades by alignment tag and compare win rate and avg R.
- Screenshot chart context for mentor review on disputed trades.
Best practices
- Combine Divergence with higher-timeframe bias — not as a lone trigger.
- Avoid curve-fitting settings on less than three months of tagged data.
- Refresh playbook screenshots when changing Divergence parameters.
- Skip trading when Divergence conflicts with written risk limits.
Common pitfalls
- Treating Divergence as a guaranteed reversal signal.
- Optimising parameters on one bullish month only.
- Trading against higher-timeframe bias because Divergence “said so”.
- Failing to log when you overrode Divergence discretionally.
How to use this in TradeLyser
Screenshot divergence at entry; review win rate with/without line break trigger.
Related terms
Moving Average Convergence Divergence plots the gap between two EMAs, a signal line, and a histogram. Traders watch crosses and momentum fades for timing — always within a higher-timeframe bias.
Mean reversion assumes prices return toward an average after stretched moves. Works in ranges; dangerous in strong trends.
Momentum trading enters in the direction of recent strength, expecting continuation short term.
Relative Strength Index compares average gains to average losses over a lookback (commonly 14). Readings above 70 and below 30 are traditional extreme zones — not automatic reversal signals.
FAQ
Hidden vs regular divergence?
Different trade logic — name which you trade.
Divergence on 5m Nifty?
Noisy — higher TF often cleaner.
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