Divergence

A divergence is price and the oscillator telling different stories. The classic example: price prints a new high, but RSI prints a lower high than its previous one. Price says "the advance continues" while momentum says "we reached this high with less force than the last one".

Spotting it takes two steps: first mark consecutive highs (or lows) on price, then compare the oscillator's peaks at those same moments. Price making higher highs while the oscillator makes lower highs is bearish divergence; price making lower lows while the oscillator makes higher lows is bullish divergence. Recall the fading-volume lesson of level 4 — divergence is the same "participation is thinning" story told in the language of momentum.

And the limit: divergence is a warning, not a trigger. In strong trends, divergences can pile up for months while price keeps going — assuming "I saw divergence, the reversal is here" teaches one of the market's most expensive lessons. All a divergence says is that the force behind the move is fading; whether that turns into a reversal is for price itself — the swing sequence — to show.