RSI Hidden Divergence Explained: How to Spot Trend Continuations Like a Pro
ACY Securities - Jasper Osita
“When price pulls back, but momentum stays strong - that’s the market telling you a continuation is ahead.”
Goal of This Lesson:
To help you understand RSI Hidden Divergence - what it signals, why it’s different from regular divergence, and how to trade it effectively to catch trend continuations.
Hidden vs. Regular Divergence: Know the Difference
Regular RSI Divergence = Spotting potential trend reversals.
Hidden RSI Divergence = Spotting potential trend continuations.
| Divergence Type | Price Action | RSI Behavior | Market Signal |
| Regular (Classic) | Higher High / Lower Low | Lower High / Higher Low | Potential reversal |
| Hidden | Higher Low / Lower High | Lower Low / Higher High | Potential continuation |
Take Note: Divergences are only applicable during a trend, either its in the beginning, the middle or the end. We do not use divergences in a sideways market.
How Hidden RSI Divergence Works
RSI Hidden Divergence appears during pullbacks in a trend — and helps you spot momentum-based continuation setups.
- In an uptrend:
Price makes a higher low, but RSI prints a lower low → bullish hidden divergence
- In a downtrend:
Price makes a lower high, but RSI prints a higher high → bearish hidden divergence
This means: Even though price pulls back, momentum remains strong, and the trend is likely to resume.
Why Hidden Divergence is Powerful
- Confirms trend strength - helps you avoid fading strong markets
- Gives early entry signals in pullbacks before breakouts happen
- Works great with structure, like demand/supply zones or fair value gaps and smart money concepts
- Fewer false signals when used with clear trend context (e.g., HH-HL or LL-LH structure)
How to Trade RSI Hidden Divergence (Step-by-Step)
Step 1: Identify the Trend
Use structure (Higher Highs / Lower Lows) or EMAs to define if you're trending up or down.
Step 2: Wait for a Pullback / Rebound
Let price form a higher low in an uptrend (or lower high in a downtrend).
Step 3: Check RSI
Look for RSI to show the opposite behavior — a lower low in an uptrend, or a higher high in a downtrend.
Step 4: Confirm With Breakout
Use a body close, breaking out of the range.
Step 5: Define Your Trade
- Entry: Breakdown / Breakout Candle
- Stop-loss: Below recent swing low (or high) or range
- Take profit: Use 2R–3R, structure levels
Example: Hidden Divergence in Gold (XAU/USD)
Imagine Gold (XAU) is in an uptrend and pulls back to a key level, whether its a Fair Value Gap, Previous Range or Moving Averages.
- Price makes a higher low, but RSI prints a lower low
- You spot a breakout of the range
- That’s your bullish hidden divergence entry - expecting the trend to resume
Final Thought
Hidden RSI Divergence is like reading between the lines. While the market takes a breath, momentum quietly signals it’s not done running.
Used with structure and confirmation, this tool can help you catch the continuation wave - not just the turning point.
Check Out My Contents:
Strategies That You Can Use:
How To Trade & Scalp Indices at the Open Using Smart Money Concepts (SMC)
How to Trade Breakouts Effectively in Day Trading with Smart Money Concepts
Complete Step-by-Step Guide to Day Trading Gold (XAU/USD) with Smart Money Concepts (SMC)
The Power of Multi-Timeframe Analysis in Smart Money Concepts (SMC)
Forex Trading Strategy for Beginners
The Ultimate Guide to Understanding Market Trends and Price Action
Mastering Candlestick Pattern Analysis with the SMC Strategy for Day Trading
Mastering Risk Management: Stop Loss, Take Profit, and Position Sizing
How To Trade News:
Why Smart Money Concepts Work in News-Driven Markets - CPI, NFP, and More
How to Trade NFP Using Smart Money Concepts (SMC)-A Proven Strategy for Forex Traders
How to Trade CPI Like Smart Money - A Step-by-Step Guide Using SMC
Learn How to Trade US Indices:
How to Start Trading Indices and Get into the Stock Market with Low Capital (2025 Guide)
Best Indices to Trade for Day Traders | NASDAQ, S&P 500, DAX + Best Times to Trade Them
How To Trade & Scalp Indices at the Open Using Smart Money Concepts (SMC)
NAS100 - How to Trade the Nasdaq Like a Pro (Smart Money Edition)
How to Trade CPI Like Smart Money - A Step-by-Step Guide Using SMC
Why Smart Money Concepts Work in News-Driven Markets - CPI, NFP, and More
How to Start Trading Gold:
How to Swing Trade Gold (XAU/USD) Using Smart Money Concepts: A Simple Guide for Traders
Complete Step-by-Step Guide to Day Trading Gold (XAU/USD) with Smart Money Concepts (SMC)
The Ultimate Guide to Backtesting and Trading Gold (XAU/USD) Using Smart Money Concepts (SMC)
Why Gold Remains the Ultimate Security in a Shifting World
How to Start Day Trading:
5 Steps to Start Day Trading: A Strategic Guide for Beginners
8 Steps How to Start Forex Day Trading in 2025: A Beginner’s Step-by-Step Guide
3 Steps to Build a Trading Routine for Consistency and Discipline - Day Trading Edition
Learn how to navigate yourself in times of turmoil:
How to Identify Risk-On and Risk-Off Market Sentiment: A Complete Trader’s Guide
How to Trade Risk-On and Risk-Off Sentiment - With Technical Confirmation
The Ultimate Guide to Understanding Market Trends and Price Action
Want to learn how to trade like the Smart Money?
Mastering the Market with Smart Money Concepts: 5 Strategic Approaches
Mastering Candlestick Pattern Analysis with the SMC Strategy for Day Trading
Understanding Liquidity Sweep: How Smart Money Trades Liquidity Zones in Forex, Gold, US Indices
The SMC Playbook Series Part 4: How to Confirm Trend Reversal & Direction using SMC
The SMC Playbook Series Part 5: The Power of Multi-Timeframe Analysis in Smart Money Concepts (SMC)
Fair Value Gaps Explained: How Smart Money Leaves Footprints in the Market
Trading Psychology and Continuous Improvement Contents:
The Mental Game of Execution - Debunking the Common Trading Psychology
5 Steps to Backtest a Trading Strategy with AI: A Step-by-Step Guide
Managing Trading Losses: Why You Can Be Wrong and Still Win Big in Trading
The Hidden Threat in Trading: How Performance Anxiety Sabotages Your Edge
Why You Fail in Trading: You Don’t Have Enough Capital to Survive
Why 90% of Retail Traders Fail Even with Profitable Trading Strategies
Follow me for more daily market insights!
Jasper Osita - LinkedIn - FXStreet - YouTube
This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.
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