The "RSI Divergence Strategy" is a strategy used when the direction of the elevation between the tops or bottoms of the RSI indicator, which is a momentum indicator, and the direction of the elevation difference between the tops or bottoms on the price chart are in the opposite direction. Here, when using the strategy of rsi divergences, rsi divergences give us signals about the direction the price will go. But this situation alone is not enough.
After the rsi divergences are seen, we need other confirmation arguments. Therefore, it would be ideal to use price action candle formations and strategies as confirmation arguments.
When we see rsi divergences here, we should bring to mind the saying: "Indicators probably don't lie!". That is, if there is a falling bottom in the price movement and there is a rising bottom in the rsi indicator at the same time, this shows us that an upward movement in the price is coming. With a similar logic, if there is a rising top in the price movement and there is a falling bottom on the rsi indicator, this shows us that a downward movement in the price is coming.
As seen in the image above, you can see 4 types of the signal about the price direction given to us by the rsi divergences: "strong", "medium", "weak", "hidden".
In short, as in a robot algorithm, for the rsi divergences strategy that we will use when entering trades, we need to see the top or bottom divergences by comparing the price chart with the rsi chart as a first step. After this step, it would be ideal to perform price action analysis, use price action strategies, and determine the risk-return ratio, and enter positions with stoploss and takeprofit orders.
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