If you're serious about reading price action, you need to understand divergence. I've been looking at this divergence cheat sheet that breaks down all four types, and honestly it's one of those fundamentals that separates people who actually trade from people who just watch charts.

Let me walk you through what I'm seeing. When price and your indicator (like RSI) start moving in opposite directions, that's when things get interesting. There are basically two camps here: regular divergence and hidden divergence. They tell completely different stories about what's coming next.

Regular divergence is your reversal signal. When price makes lower lows but RSI is printing higher lows, that's regular bullish divergence — you're looking at a potential bounce after a downtrend. Flip it around: price making higher highs while RSI shows lower highs? That's regular bearish divergence, and it's warning you an uptrend might be running out of gas. This is the cheat sheet pattern most people focus on because reversals can be explosive.

But here's what a lot of traders miss — hidden divergence. This one tells you the trend isn't done yet. Hidden bullish divergence shows up when price pulls back to higher lows but RSI dips to lower lows. That's not a reversal signal, that's a continuation setup. Same logic backwards: lower highs on price with higher highs on RSI during a downtrend means the selling pressure is likely to resume after a brief relief rally.

The pattern recognition part is straightforward once you see it a few times. Price action versus indicator movement — that's your whole divergence cheat sheet right there. But the real skill is knowing which type you're looking at and what it actually means for your next trade. Regular signals reversals, hidden signals continuation. That's the core of it.