Master Trading Signals With This Complete Divergence Cheat Sheet Guide

A divergence cheat sheet is one of the most powerful tools for technical traders looking to identify potential reversals and trend continuations. By combining price action with RSI (Relative Strength Index) indicators, you can develop a systematic approach to spotting market turning points before they fully develop. Let’s walk through how to use this comprehensive reference guide to elevate your trading analysis.

Regular Divergence: Recognizing Potential Market Reversals

Regular divergence signals that the current trend may be losing momentum and a reversal could be on the horizon. This is where your divergence cheat sheet becomes invaluable for early signal detection.

Regular Bullish Divergence occurs when price creates lower lows while the RSI simultaneously forms higher lows. This mismatch between price and momentum suggests buyers are accumulating at lower levels despite declining prices. After a strong downtrend, this pattern typically indicates a reversal to the upside is possible. Traders use this signal to anticipate where the bounce might begin.

Regular Bearish Divergence presents the opposite scenario: price reaches higher highs while RSI registers lower highs. This divergence indicates weakening momentum despite rising prices—a classic warning sign. Following an extended uptrend, this pattern frequently precedes a reversal to the downside, helping you prepare for potential pullbacks or reversals.

Hidden Divergence: Signals That Trends Will Continue

While regular divergence warns of reversals, hidden divergence from your technical divergence cheat sheet indicates something entirely different—the underlying trend will likely persist after temporary corrections.

Hidden Bullish Divergence forms when price makes higher lows (showing an uptrend is intact) while RSI creates lower lows (suggesting temporary weakness). This pattern reveals that despite pullbacks, the uptrend maintains structural strength. Once price recovers from the dip, upward momentum typically resumes with continued gains.

Hidden Bearish Divergence develops when price generates lower highs (confirming downtrend continuation) while RSI produces higher highs (temporary strength). This divergence suggests that despite brief bounces, the dominant downtrend remains in control. After the bounce fades, selling pressure typically returns, pushing prices lower.

Putting Your Divergence Cheat Sheet Into Action

To implement this divergence cheat sheet effectively in your trading:

First, identify which divergence type you’re observing by comparing price extremes to RSI extremes. Are lower prices paired with higher RSI momentum (regular bullish)? Are higher prices matched with declining RSI strength (regular bearish)? This pattern recognition is crucial.

Second, determine the timeframe relevance. Divergences on daily or weekly charts typically carry more weight than those on shorter timeframes. Your divergence cheat sheet works best when applied to higher timeframes where signals are more reliable.

Third, use divergence alongside other technical indicators—support/resistance levels, moving averages, or volume analysis—to increase confirmation probability. A divergence alone is directional bias; combined with additional confluence, it becomes a high-probability setup.

Finally, always maintain strict risk management. Even the most reliable divergence signal can fail, so proper position sizing and stop-loss placement remain essential trading fundamentals regardless of how clear your divergence cheat sheet signals appear.

The four divergence patterns—regular bullish, regular bearish, hidden bullish, and hidden bearish—form the foundation of momentum-based technical analysis. Master this divergence cheat sheet, practice identifying these patterns across multiple markets and timeframes, and you’ll develop the pattern recognition skills that separate consistent traders from the rest.