Scholastic Divergence by Rob Booker. This eBook illustrates Rob’s stochastic divergence strategy.

What is Divergence?
di·ver·gence (d -vūr j ns, d -)
n.1: A moving or spreading apart in different directions from a common point.
In trading, “Divergence” is a term used to describe the phenomenon of price making one
pattern, and an indicator making the opposite.
I will outline two main categories of Divergence. I will call them:
• Regular Divergence (RD) &
• Hidden Divergence (HD)
Regular Divergence is a counter trend signal. RD attempts to show that a trend may soon
be coming to an end or at least to a pause with a slight retracement.
Hidden Divergence is a trend confirming signal. HD attempts to show you that the pause
or retracement of the trend may be nearing its end, and the trend may soon be ready to
There are bullish and bearish types of both Regular and Hidden Divergence.
You can use pretty much any oscillator to show divergence, but some of the most popular
are: MACD, Stochastics, RSI, CCI, and Momentum. I will be using the MACD
Histogram in the examples.
Before we continue, I would like to warn that upon first attempt to comprehend
Divergences, it is possible that your brain may overheat, and blow your radiator or head
gasket. I will try to make it as simple as possible, but don’t say I didn’t warn you.