In any market, there are slight variations and differences between a symbol and and indicator that you're evaluating. One such set of variations are called convergences and divergences. Technical analysts refer to these two terms regularly because they can be used in many different contexts, but their essence is always in relation to whether two prices are moving away from each other (diverging) or moving towards each other (converging).

A divergence is when prices and an indicator value go in opposite directions, and according to technical analysts, this indicates that momentum is slowing down, and a possible price reversal is pending.

A convergence is when prices and indicator values are moving towards each other on a graph, and indicates a build up of momentum and a continuation pattern is ensuing.

The typical indicators that are used to find convergences and divergences are MACD, RSI, CCI and Stochastics, but any indicator that acts as an oscillator can be used to find these powerful convergences and divergences.

The cautious part that I mentor new traders and technical analysts alike, is that these convergence and divergence patterns are seen in a lot of cases, but that there is good reason to experiment to find the exact values that work for your trading style, your risk tolerance, and the markets you trade in.

In general, if you take a traditional MACD and look for convergences and divergences against a DOW 30 or Nasdaq 100 stock, these patterns hold true, but for foreign exchange (Forex), futures or penny stocks, this isn't always the case, and in some cases, I've seen the exact scenarios hold true for a wide variety of stocks in these more volatile markets.

The other thing that needs to be experimented with is to use different indicators that reliably find positive convergences and divergences with a follow on long or short opportunities.

There are many trading indicators that will locate these automatically, negating the need for you to manually inspect the charts, which is a nearly impossible task for intra-day trading. For instance, the multi divergence indicator for NinjaTrader, and built in versions for TradeStation, MetaStock and multiple 3rd party indicators for MetaTrader that will help you improve your new trading strategy.

Matthew Kettlewell writes up custom and propietary indicators for the NinjaTrader trading platform, and has a large selection of free NinjaTrader indicators and strategies as well. Please visit http://www.TazaTek.com for more information.