Most traders know divergences as reversal signals: price rises, RSI falls, potential top. That's the standard version. But there's another category — hidden divergences — that give continuation trend signals. Often, they're more reliable.
DYOR filters both types on the /divergences page via the "Type" filter. Here's how to distinguish them and when to use each.
Regular (Standard) Divergences: Reversal Signals
A regular divergence appears when price and indicator move in opposite directions on new extremes.
Bearish Regular Divergence (Potential Bearish Reversal)
Price makes a new higher high (higher high). The indicator (RSI, MACD, OBV…) makes a lower high (lower than the previous high).
Reading: Momentum is weakening while price keeps rising. Buyers are losing steam. A reversal is possible.
Typical context: End of a bull rally, in resistance zone, often after a parabolic phase.
Bullish Regular Divergence (Potential Bullish Reversal)
Price makes a new lower low (lower low). The indicator makes a higher low (higher than the previous low).
Reading: Even though price keeps falling, selling pressure is exhausting. Downward momentum is slowing. A bullish reversal is possible.
Typical context: End of a correction, in support zone, after a flush downward.
Hidden (Continuation) Divergences: Trend Continuation Signals
A hidden divergence appears when price and indicator move in opposite directions on retracements — not on new extremes.
This is counter-intuitive to understand at first, but it makes sense: the price structure (higher lows in an uptrend) is healthy, but the indicator temporarily retreats, signaling the market is "recharging" before resuming the trend.
Bullish Hidden Divergence (Bullish Continuation)
In an uptrend, price makes a higher low (a higher trough than the previous — healthy uptrend structure). But the indicator makes a lower low (a lower trough).
Reading: The indicator suggests weakness that price structure doesn't confirm. Bulls remain in control. The trend will likely resume.
This is an entry signal on pullback in an established uptrend.
Bearish Hidden Divergence (Bearish Continuation)
In a downtrend, price makes a lower high (a lower peak than the previous — healthy downtrend structure). But the indicator makes a higher high (a higher peak).
Reading: The indicator suggests strength that price structure doesn't confirm. Bears remain in control. The downtrend will likely resume.
Regular divergence = price and indicator make new extremes → reversal
Hidden divergence = price has healthy structure, indicator retreats → continuation
Why Hidden Divergences Are Often More Reliable
The reason is simple: they confirm an existing trend rather than fight it. Trading in the direction of the trend is statistically more robust than counter-trading.
Regular divergences require fighting momentum. They work, but need tighter risk management because you're entering against the current. Hidden divergences let you enter on a pullback in an established trend — with the market for you.
Additionally, hidden divergences are less well-known. Fewer traders watch them, so they're less "played" and less susceptible to generating false signals through self-fulfilling prophecy.
How to Filter in DYOR
On the /divergences page:
- Type filter: Choose "Standard" for regular divergences, "Hidden" for hidden divergences
- Direction filter: Bullish or Bearish based on your market bias
- Indicator filter: RSI, MACD, Stoch RSI, OBV — each has its nuances
- Timeframe filter: Prioritize 4h and daily for reliable signals
A bullish regular divergence in a strong bullish trend doesn't have the same value as the same divergence after a 60% crash. Global market context determines signal quality.
When to Use Each
Clear trending market → prioritize hidden divergences for pullback entries in the direction of the trend.
Range or post-extreme move → regular divergences are more relevant for anticipating reversals at range boundaries or after excesses.
Uncertain / choppy market → avoid trading divergences. In absence of clear trend, continuation and reversal signals contradict constantly.
The Pitfall to Absolutely Avoid
Never trade a divergence without validating the overall trend.
This is the classic beginner mistake: spot a bullish regular divergence and enter immediately, without checking if the token is in a heavy downtrend on a higher timeframe. A bullish regular divergence in a downtrend on daily might just signal a temporary technical bounce — not a reversal.
Recommended workflow:
- Identify trend on Trend Scanner DYOR (daily, 4h)
- Open /divergences and filter based on your bias
- On candidates, verify the price chart to validate price structure
- Check confluences: is there support/resistance, a trendline or Fibonacci level nearby?
The best entries combine divergences + price structure + level confluences. A divergence alone is a clue. Confirmed by context, it's a signal.