Hidden divergence in technical analysis is a signal that shows the current trend may continue. It happens when the price makes a higher low (in an uptrend) or a lower high (in a downtrend), but the indicator like RSI or MACD shows the opposite. Traders use hidden divergence to find good entry points in the direction of the trend. It helps in confirming that the trend is still strong and not ending.

What Is Hidden Divergence in Technical Analysis?

Hidden divergence is a concept used in technical analysis that helps traders identify if the current trend is likely to continue. It is called "hidden" because it's not easily visible by just looking at the price chart. It becomes clear when you compare price movement with indicators like RSI (Relative Strength Index), MACD, or Stochastic.

For example, in an uptrend, if the price is making higher lows but the indicator is making lower lows, it signals hidden bullish divergence. This tells the trader that the upward trend is still strong and may continue.

Why Is Hidden Divergence Important?

Hidden divergence is important because it helps traders confirm the strength of a current trend. Many times, traders worry if the trend will reverse. But hidden divergence gives confidence that the trend is still strong. This helps in making better decisions while buying or selling stocks, especially during pullbacks.

It also helps in avoiding false signals. Instead of reacting too early to small price movements, hidden divergence lets traders stay patient and continue in the direction of the trend.

What Is the Difference Between Hidden and Regular Divergence?

Regular divergence signals a possible trend reversal, while hidden divergence signals a trend continuation. In simple terms, regular divergence tells you when a trend might be ending, and hidden divergence tells you when a trend is still going strong.

For example, in regular divergence, the price makes a higher high but the indicator makes a lower high, which can mean a reversal. In hidden divergence, the price makes a higher low while the indicator makes a lower low — showing the uptrend is still strong.

How to Spot Hidden Divergence?

To spot hidden divergence, you need to use indicators like RSI, MACD, or Stochastic along with the price chart. In an uptrend, check if the price is making higher lows. At the same time, see if the indicator is making lower lows. This is hidden bullish divergence. In a downtrend, look for lower highs in price and higher highs in the indicator — this is hidden bearish divergence.

It’s best to use hidden divergence along with other technical tools like trendlines and moving averages to get strong confirmation before entering a trade.

When Should You Use Hidden Divergence?

You should use hidden divergence when you are already in a trade or planning to enter in the direction of the trend. It is most helpful during pullbacks or corrections, where the price moves temporarily against the trend. Hidden divergence can confirm that this pullback is not a reversal but just a pause before the trend continues.

Many experienced traders use hidden divergence with trend-following strategies. It helps reduce the risk of entering at the wrong time and gives more confidence while holding a position.

Which Indicators Are Best for Finding Hidden Divergence?

The most commonly used indicators for finding hidden divergence are RSI (Relative Strength Index), MACD (Moving Average Convergence Divergence), and Stochastic Oscillator. These indicators help show the strength of the price movement. When used with price charts, they can clearly show if a hidden divergence is forming.

Traders prefer these indicators because they are easy to understand and give reliable signals when used correctly. They can be applied on different time frames depending on your trading style — whether intraday, swing, or positional.