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Delta-price divergence reliability, reversal prediction, and false signals
Delta divergence occurs when price makes a new high but delta does not (bearish divergence), or when price makes a new low but delta does not (bullish divergence). This disagreement signals that the aggressive participants driving the move are losing conviction.
| Divergence Type | Hit Rate | Avg Reversal Size | Best Context |
|---|---|---|---|
| Bearish (price up, delta down) | 55-65% | 1.2-1.8x entry bar | At resistance / HVN |
| Bullish (price down, delta up) | 58-68% | 1.3-2.0x entry bar | At support / HVN |
| Double divergence | 70-78% | 1.8-2.5x entry bar | Extended trend |
Look for delta divergence at key S/R levels — this confluence dramatically improves win rates. Wait for the divergence to complete (second swing), then enter on the first confirmation candle. Stop goes beyond the divergence extreme. Double divergences (three swings with two divergences) are the highest probability.