Recently, someone asked me how to understand the concepts of bearish and bullish divergences in technical analysis. I found that these two concepts are often misused by many people, so I want to share my understanding.

Simply put, these signals mainly look at indicators like RSI or MACD. A bearish divergence occurs when the price hits a new high but the indicator doesn't follow and instead weakens, which usually suggests that the upward momentum may be slowing down. Conversely, a bullish divergence happens when the price hits a new low but the indicator starts to rise, indicating that the selling pressure is weakening and a reversal to the upside might be coming.

Personally, I use the bullish divergence signal more often. When I see the price making a new low but RSI or MACD failing to go lower and instead starting to rise, it alerts me to a potential rebound opportunity. Bullish divergence generally means the market's selling momentum is waning, and bulls might be stepping in.

But there's an important point—different indicators sometimes give slightly different signals for bullish divergence. The logic is similar but the details vary. Also, the strength of the signal depends on the price volatility and the degree of divergence. If the divergence occurs in overbought or oversold zones, the signal tends to be more reliable.

Honestly, indicators are not foolproof. I've seen many false divergence signals, especially in choppy markets. So my approach is not to rely solely on one signal for trading decisions. Instead, I combine it with moving averages, volume, support and resistance levels, and other factors. A bearish divergence warns me to be cautious of a pullback, while a bullish divergence suggests I should watch for a rebound. But ultimately, I confirm from multiple angles before taking action.

One last point is risk management. Even with clear divergence signals, I set stop-loss orders—this is basic discipline. Developing a solid trading plan and strictly executing stop-loss and take-profit orders help me stay steady on the path of technical analysis.