Relative Strength Index Divergence

Relative Strength Index divergence occurs when the price of an asset moves in one direction while the RSI indicator moves in the opposite direction. This discrepancy indicates that the momentum behind the current price trend is weakening, even if the price itself is still hitting new highs or lows.

In crypto markets, this is frequently used to spot potential reversals before they occur on the price chart. A bearish divergence happens when price makes a higher high but the RSI makes a lower high, suggesting waning buying interest.

Conversely, a bullish divergence occurs when price makes a lower low but the RSI makes a higher low, signaling decreasing selling pressure. This tool is essential for traders looking to exit positions or enter counter-trend trades.

It acts as a bridge between price action and momentum, helping to filter out false breakouts. When used alongside volume data, it provides a robust signal for trend exhaustion.