Complete Guide to BIAS Divergence | Master the Meaning of Moving Average Divergence and Practical Trading Applications in One Article

ChainSherlockGirl · 2026-01-06T18:15:48+00:00

Bias (BIAS) is an indicator that measures the current price's deviation from the moving average line, expressed as a percentage. It helps traders identify whether the market is overbought or oversold, and when the price significantly deviates from the moving average, there may be opportunities for a pullback or rebound. Bias is divided into positive bias (price above the moving average) and negative bias (price below the moving average).

ChainSherlockGirl

2026-01-06 18:15:48

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What is the Divergence Rate? Understanding the Core Concept of Divergence

Divergence Rate (BIAS), in the simplest terms, is a measure of “how far the current price is from the moving average line.” In short, divergence means that when the price deviates from its average cost line, market participants’ psychology will change.

The divergence rate is expressed as a percentage and mainly helps traders determine whether the market is in an overbought or oversold state. To understand from another perspective:

Price significantly above the average → Market is overly optimistic → May face a pullback pressure
Price significantly below the average → Market is overly pessimistic → May present a rebound opportunity

This phenomenon is divided into Positive Divergence (price above the moving average) and Negative Divergence (price below the moving average).

Understanding the meaning of divergence with a real-life example

Imagine a rice market during a bumper harvest year: when prices hit a new high, farmers worry that “excessive rise will lead to a reversal,” and rush to sell; when prices drop to a low point, buyers start to scramble to purchase. Investor psychology is similar; when prices reach extremes, the idea of contrarian operation will emerge.

The Calculation Formula of Divergence Rate and Moving Average Line

Calculation formula:

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