As we all know there are mainly two types of divergence :-
Regular divergence
a. Bullish regular divergence
b. Bearish regular divergence.
Hidden divergence
a. Bullish hidden divergence
b. Bearish hidden divergence.
Now, in case of bullish regular divergence the price makes LL and the RSI makes HL… this indicates that there is no momentum/strength behind the bearish move… and the price will move up…
Similarly in the case of bearish regular divergence the price makes HH but the RSI makes LH… this indocates that there is no strength behind the bullish move and the price will fall…
But in case of bullish hidden divergence the price makes HL and the RSI makes LL…
And for bearish hidden divergence the price makes LH and RSI maks HH…
Not sure how to put it in simple words as you posted above that is what it is, you have to read it, view some examples and understand it as per my knowledge.
Hidden divergences basically use the concept that buy when the price is oversold in uptrend
And sell when overbought in downtrend
That is the pre requisite for hidden divergences
Don’t know the exact logic though that why is rsi forming lower low
Let say In case of bullish hidden divergence the price is falling slower through the RSI shows great downward momentum… It means although bearish momentum is high but buyers are present there who r preventing the price to fall… so there is greater chance of bullish move…
Similarly… In case of bearish hidden divergence the price is going up slower ( in the corrective wave) though the rsi shows high upward momentum… It may means that sellers are that levels who are selling and preventing the price to go up… So there may be a high probability the down trend will continue…
