The previous articles focus on the deep analysis on the meaning and use of both convergence and divergence. In this article, we will focus on the main differences between convergence and divergence. It is an important topic because technical traders worry a lot about divergence and convergence. The major reason is because convergence occurs in the normal market. These are two extreme values where traders should note between convergence and divergence. Most technical indicators utilize divergence as tools like oscillators.
Oscillators here refer to a tool constructing high and low bands between two extreme values. Then, oscillators will build an indicator showing a trend that fluctuates within the bonds. The purpose of this tool is to figure out the short-term overbought or oversold conditions. For example, when an oscillator indicates the upper extreme value, analysts would say that it means the asset is overbought. On the other hand, when it comes to the lower extreme, analysts will point out that the asset is oversold.
In a nutshell, divergence shows a condition where the trend is both weak and unsustainable. Most of the time, traders would utilize technical analysis for their trading strategies to read the asset momentum. By definition, momentum is the acceleration rate of the price of security that moves speedily when the price is changing.
On the other hand, convergence refers to the price of an indicator, asset or insect moving in the same direction in technical analysis. The epitome would be there is a convergence when DJIA (Dow Jones Industrial Average) presents gains at the same time. It will show how the accumulation or distribution line is skyrocketing.
