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The main difference between ATR and the plain daily range is that ATR takes into account gaps. What is a divergence?

April 26, 2017account ATR divergence gaps main plain takes

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The main difference between ATR and the plain daily range is that ATR takes into account gaps. What is a divergence?

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A divergence occurs when a momentum indicator or other instrument fails to confirm a move in the price action of the market under observation. For instance, if the SP futures makes a new low in price, but the 3/10 oscillator fails to make a new momentum low, then the SP is said to be diverging from the oscillator. Likewise, if the SP futures make a new low that is not confirmed by new lows in a related market or index (for example the SP versus the Dow Industrials, or the SP versus the TICK), this is also considered a form of divergence. Divergences are useful in that they warn of a loss of momentum and often precede a reversal in price.