Price rises while liquidity leaves (or the reverse), a warning of a misleading move or a coming reversal. Finviro's term: “Divergence”.
What divergence is
Divergence (Divergence) catches two signals that should agree and don't: price makes a new high while momentum, volume or flow fails to reach its earlier peak, or price makes a new low while the signal improves. A divergence says the latest move has lost its support.
Why it is one of the most honest early warnings
A healthy trend advances on every front: price, momentum, participation and money. When price advances alone, the fuel is probably running out. Historically, major tops rarely arrived without a divergence weeks before. But it is an exhaustion warning, not a reversal date: the bleeding can last a long time before the fall.
Its practical types
Price/momentum (the best known, with RSI), price/volume (a high on faint volume), price/flow (a rise met by net premium selling), and index/breadth (an index high with narrower participation). The last carries the most weight in reading the whole market.
Hypothetical example
An index makes its third high in two months. The second came with a relative strength of 74 and the third with 63, weaker breadth and negative premium flow. Three signals pulled back together. This is not a sell order, just a clear reason to tighten risk management.
Common mistake
Acting on the first small divergence: in strong trends, divergences build and cancel one after another. Its meaning grows with more confirming signals and with structural levels behind it, not with one eager eye.
Why it warns but doesn't time
Price can keep going in its direction for weeks after a divergence shows up. It says the fuel is running out, not that the reversal has begun. That is why it is used to tighten stops and cut size, and not as a trigger for a counter-trend position without price confirmation after it.
Where to see it on the platform
The quantitative analysis tools show momentum and volume next to price, the breadth bar reveals participation divergence, and the flow page reveals money divergence.
The technical chart shows indicators below price on a linked axis, so you see the divergence against its candle.
