The Divergence Indicator is a free tool offered to users on Trading View. The main use of the indicator is by highlighting potential bearish and bullish divergences. The indicator also highlights hidden divergences in both bullish and bearish varieties.
How to trade using the Trading View Divergence Indicator
Divergences can be powerful and reliable signals when traded appropriately and can occur in either direction. A bullish divergence occurs when volume or momentum makes a higher high while price makes a lower low. In these situations, you would be best to go long if you anticipate that the divergence will lead to a reversal in the current price trend.
The inverse is true for bearish divergences. A bearish divergence typically occurs near market tops and has opposite characteristics to a bullish divergence. In these cases, prices make a higher high while other technical indicators make a lower low. Traders should then choose to short the security in question as in all likelihood the prices are forecasted to drop.
By using the Divergence Indicator you can better be prepared for when prices are about to drop for a bearish divergence, or rise in prices for a bullish divergence. These signals are not guaranteed however.