The Knoxville Divergence indicator suggests that price will reverse in direction, making it a counter-trend indicator. For example, if price is in an uptrend with the Knoxville Divergence line set above the price on the chart, the trader will understand that the indicator is suggesting price will potentially reverse and shift to a downtrend shortly. This indicator is very useful for counter-trend traders and general trend-traders alike, as it adds perspective for those seeking to enter a trade, while following a long-term trend.
This indicator is used and admired by Rob Booker, an experienced entrepreneur and currency trader who has helped bring popularity to the indicator.
When analyzing Knoxville Divergence, it should be known that the indicator is comprised of two main elements.
The Momentum indicator. If price is rising, but the momentum indicator is falling, the Knoxville Divergence indicator might appear on the chart to signal to the trader that a price reversal may be closing in. This indicator must be paired with another, however, because it does not tell the trader everything they need to know. This is why it pairs nicely with our second element.
Relative Strength Index. If there is a simultaneous discrepancy between price and the momentum indicator, the Relative Strength Index (RSI) will signal as overbought or oversold, and will trigger the Knoxville Divergence line to appear on the chart.
The Knoxville Divergence line seems helpful, but what timeframes are best to use when utilizing the indicator? Good question. The indicator can be used to analyze any chart timeframe from 1m up to monthly charts for the best readings.
As usual, the Knoxville Divergence is a great indicator, but it is best used with other technical analysis indicators and tools that help analyze mutual funds, futures, currencies, and so on.
The Knoxville Divergence indicator suggests that price reversal will most likely occur in the near future. It is very useful because it helps traders determine when prices are most likely to dissent from its directional trend, giving trend-traders insight into how to act in long-term trades.