RSI (Relative Strength Index) divergence and MACD (Moving Average Convergence
Divergence) divergence are both tools used in technical analysis to identify potential trend
reversals by analyzing the price momentum. Here’s how they differ:
1. Indicator Basis
RSI Divergence: RSI measures the speed and change of price movements within a range of 0
to 100. RSI divergence occurs when the RSI moves in the opposite direction of the price. It is
generally used to indicate potential overbought or oversold conditions.
MACD Divergence: MACD is based on two moving averages (usually the 12-day and 26-day
EMA) and the difference between them. MACD divergence happens when the MACD line
diverges from the price movement, indicating a possible trend reversal.
2. Interpretation of Divergence Types
RSI Divergence:
Bullish Divergence: Occurs when the price makes a lower low, but RSI makes a higher low,
indicating potential buying interest despite the price decline.
Bearish Divergence: Occurs when the price makes a higher high, but RSI makes a lower high,
suggesting the potential weakening of the uptrend.
MACD Divergence:
Bullish Divergence: Seen when the price makes a lower low, but the MACD line (or histogram)
forms a higher low, signaling a possible trend reversal upward.
Bearish Divergence: Occurs when the price reaches a higher high while the MACD line makes a
lower high, indicating a potential trend reversal downward.
3. Sensitivity to Price Movements
RSI: RSI is more sensitive to sudden price changes, making it more effective in identifying
short-term overbought or oversold conditions.
MACD: MACD is considered a lagging indicator and is typically used for longer-term trend
analysis. Its divergence may not show up as quickly as RSI but may be more reliable for
sustained trend changes.
4. Use Cases in Trading
RSI Divergence: Often used in ranging markets where price is oscillating within a range.
MACD Divergence: Better suited for trending markets, where it can help confirm or question the
strength of a trend.
Summary Table:
In practice, traders often use both RSI and MACD divergence together for more reliable trade
signals, as each can complement the other’s strengths and weaknesses.
