Divergences are not that simple...

I trust the RSI divergences. A bit too much. And I have been hit ( hard ) at times because of that. Especially in the smaller time frames while day trading. It seems to work most of the times, but I dont know how much it will work ( 2 pts or 100 pts ? ). Here is a nice article that goes over these same issues...

"However, most traders fall prey to the concept of divergence and see it as the end or reversal of the prevailing trend of the market. All would be right in the world if markets were to reverse from simple divergence. But there are times when sentiment and momentum are so strong that the market continues to make new highs (or lows), which will keep the RSI at overbought (or oversold) levels for extended periods of time."


http://www.traderslog.com/RSI-Indicator-Trading-Model.htm

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