What Are RSI Divergences? Explained for Malaysian Traders

As a Malaysian crypto trader in 2025, RSI divergences are a powerful tool for spotting potential trend shifts in volatile markets like BTC/MYR. They occur when an asset's price moves one way while the Relative Strength Index (RSI) heads the opposite, highlighting mismatches in momentum. This can flag reversals or continuations, aiding decisions on platforms like SINEGY. Use them with other indicators for better accuracy in Malaysia's regulated space. This guide covers definitions, calculations, types, spotting methods, best uses, pitfalls, strategies, and examples.

What Is the RSI and How Is It Calculated?

The Relative Strength Index (RSI) is a momentum indicator measuring price change speed over a set period, usually 14, on a 0-100 scale. It compares gains to losses: High values (near 100) show strong upward momentum; low (near 0) indicate downward. Overbought (above 70) or oversold (below 30) levels signal potential reversals. Charting tools handle calculations automatically, making RSI versatile for stocks, forex, and crypto like MYR pairs on SINEGY.

Defining RSI Divergence

RSI divergence arises when price hits new highs/lows, but RSI doesn't match, suggesting fading momentum. This hints at reversals, though not guaranteed—trade with probabilities. Backtest for reliability in Malaysian market conditions.

• Bullish: Price lower low, RSI higher low—weakening downtrend.
• Bearish: Price higher high, RSI lower high—weakening uptrend.

Types of RSI Divergence

Four main types, split into regular (reversals) and hidden (continuations):

1. Regular Bullish: Downtrend price lower lows, RSI higher lows—fading sells, potential upside.
2. Regular Bearish: Uptrend price higher highs, RSI lower highs—fading buys, consider shorts.
3. Hidden Bullish: Uptrend price higher low, RSI lower low—trend strength, pullback ending.
4. Hidden Bearish: Downtrend price lower high, RSI higher high—downtrend resuming after rally.

How to Spot RSI Divergence

Steps:

1. Add 14-period RSI to chart.
2. Mark highs/lows on price/RSI.
3. Check mismatches; act with confirmation.
4. Draw trendlines; use candle closes for accuracy.

Some tools alert for levels—focus on structure breaks for entries.

When RSI Divergences Work Best

Stronger on higher timeframes (daily+) after extended trends. Less reliable in parabolas; combine with resistance, candlesticks, or volume for confluence. For altcoins, check BTC/markets like Bursa indices for alignment.

Common Pitfalls and Limitations

No guarantees—strong trends may pause, not reverse; invalidations common in extremes (RSI >70). Lower timeframes signal minor moves; always use stops. For MYR trades, volatility amplifies risks when counter-trending.

General Tips

Use confluence; multi-timeframe analysis; stops beyond levels. Probabilistic mindset; checklists for entries. For altcoins, BTC divergences boost rates.

Trading Strategies Using RSI Divergence

Reversal (Regular): Enter post-confirmation (RSI cross/trend break); stop beyond high/low; profit at support/resistance.

Continuation (Hidden): Enter pullbacks; confirm RSI >50/price resumption—ideal for trends.

Real-World Examples

In November 2022, BTC bottomed: Weekly chart showed bullish divergence—price lower low (~RM 70,000 equivalent), RSI higher low, with volume spike signaling reversal prelude.

RSI divergences sharpen trades—apply on SINEGY. Download our Mobile App for secure MYR access and exclusive guides!