Pipruit: I see. And what is the advantage of divergence? Commander in Pips: The major advantage is that it forms near extremes. It could be as local as major extremes. So as it forms at extremes, i.e. tops and bottoms, it allows us to establish position at a top or bottom. In other words, you have the chance to sell on top and to buy at bottom – that’s what we want to do. Pipruit: Cool! So, I have to buy any time when I see convergence and sell any time when I see divergence, right? Commander in Pips: Wrong. You have to know already, that as some pattern becomes more popular it gets trickier. Trading divergences is not a piece a cake – it fails as often as it works or even more often. It means that we need some parameters that will allow us to filter divergences and to shift the odds of its trading in our favor. Pipruit: Right. And how we will do that? Commander in Pips: First we will start from description what kind of divergences exists in the market. Then we will discuss how to better to deal with them. Common Divergences This kind of divergence you can see very often on any market and on any time frame. They look like the explanation above. Let’s take a look at chart #1 to make it more clearly for you: Chart #1 | 60min EUR/USD MACD Bearish Divergence Pipruit: Wow, cool! I’ve seen this kind of price action before and guessed that this should mean something, but was not able to understand it properly.