Volume Divergence – Types & Explanation
Volume divergence means:
The price is saying one thing, but the volume is saying something else.
In simple terms, the price is moving in one direction, but the strength behind that move (buyers or sellers) isn't as strong as it looks — which raises doubts about a trend reversal or a fake breakout.
1. Bearish Volume Divergence
Price: Making a higher high
Volume: Making a lower high
What signal does this give?
It shows that the price is going up, but buyers aren't as interested. Momentum is weakening.
Result: Weak uptrend or possible reversal downwards.
Real-life analogy: Like someone running fast in a race but out of breath — looks like they might stop soon.
2. Bullish Volume Divergence
Price: Making a lower low
Volume: Making a higher low
What signal does this give?
The price is falling, but the selling pressure is getting weaker. There's a chance of an upward reversal.
Result: Weak downtrend or a bullish reversal.
Real-life analogy: Like someone who’s fallen, but didn’t get hurt much — looks like they’ll get back up.
Bonus: Hidden Volume Divergence (Advanced)
This is a slightly advanced concept, but professional traders use it to spot trend continuation.
3. Hidden Bearish Volume Divergence
Price: Lower high
Volume: Higher high
Interpretation:
The price is making a lower high (indicating a downtrend), but volume is increasing — this suggests sellers are strong, and the downtrend may continue.
4. Hidden Bullish Volume Divergence
Price: Higher low
Volume: Lower low
Interpretation:
The price is making a higher low (indicating an uptrend), but volume is decreasing — this suggests buyers are building quietly, and the trend may continue.
Conclusion (Professional Note):
Regular Divergence → Indicates trend reversal
Hidden Divergence → Indicates trend continuation
And divergence signals become even stronger when you combine them with price action, support/resistance, and indicators like MACD or RSI.