Strength of Divergence Across Multiple Indicators

The Strength of Divergence Across Multiple Indicators tool provides a comprehensive metric for assessing divergence strength by analyzing multiple technical indicators simultaneously. It aggregates data from several oscillators to provide a single strength value, helping traders identify high-probability reversal points through a weighted scoring system.

Usage

The indicator detects both regular and hidden divergences across a suite of built-in indicators. When a divergence is identified, the script calculates a "Divergence Strength" value.

• Strength Labels: Labels appear on the chart showing the total strength value and the number of indicators confirming the divergence. Hovering over these labels reveals a detailed breakdown of each contributing indicator and its individual strength score.
• Visual Styling: Solid lines represent regular divergence, while dashed lines indicate hidden divergence. The size and transparency of the labels dynamically adjust based on the calculated strength, with "Extreme" readings producing the largest and most opaque labels.
• Weighting: Users can prioritize specific indicators or divergence types. For example, if RSI divergence is considered more reliable than OBV, its weight can be increased in the settings to disproportionately influence the total score.

Details

The script calculates the total divergence strength as the sum of weighted individual indicator strengths. Each indicator's strength is derived from two primary components:

1. |ΔPrice|: The magnitude of price change between the two pivots.
2. |ΔIndicator|: The magnitude of change in the indicator value between the same pivots.

To ensure compatibility across different assets and indicator scales, these changes are expressed in terms of standard deviations: |ΔIndicator| = |value1 - value2| / (2 * StDev(indicator, 100))

The default configuration includes RSI, OBV, MACD, Stochastic, CCI, MFI, and the Awesome Oscillator (AO). The tool also includes a "Trendline Break" filter, which invalidates divergences if price crosses the hypothetical trendline between pivots, ensuring the structural integrity of the signal.

Settings

Divergence Params

• Bullish/Bearish/Hidden Switches: Toggles the detection of specific divergence directions and types.
• Exclude if broken trendline: If enabled, invalidates signals where price has breached the trendline between pivots.
• Pivot Lengths: Sets the required number of bars before and after a pivot to confirm its validity.
• Lookback Bars/Pivots: Defines the search window for finding previous pivots.
• Regular/Hidden Weights: Adjusts the multiplier for regular vs. hidden divergence types.
• Δ Price/Indicator Weights: Controls the balance between price movement and oscillator movement in the strength formula.

Indicators

• Indicator Toggles (RSI, OBV, etc.): Enables or disables specific indicators for the aggregate calculation.
• Weight: The multiplier applied to that specific indicator's contribution.
• Extreme Value: The threshold used to categorize the divergence as "Extreme" for that specific indicator.

Display & Alerts

• Show Largest Labels Above: Sets the threshold for "Extreme" visual styling.
• Don't Show Labels Below: Filters out noise by hiding low-strength signals.
• Alert for values above: Triggers a notification when the aggregate strength exceeds a user-defined level.

FAQ

How do I interpret the strength value? The value is an aggregate score. A higher value indicates that more indicators are in agreement and the magnitude of the divergence (relative to standard deviation) is high.

Why are some labels larger than others? Label size is determined by the "Extreme divergence" setting. Signals that exceed this threshold are visually emphasized as they represent higher-confluence setups.

How can I access this tool? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.