Overlay - HARSI + Divergences

The Overlay - HARSI + Divergences indicator provides a comprehensive technical analysis suite that combines Heikin Ashi RSI oscillators with multi-layered divergence detection and WaveTrend signals directly on the price chart. This tool is designed to identify high-probability trend reversals and exhaustion points by seeking confluence between overbought/oversold conditions and price-momentum discrepancies.

Usage

This indicator serves as a confluence tool for identifying potential entry and exit zones. It is particularly effective when used on the 1-minute timeframe for Forex or as a confirmation layer at established Support and Resistance levels.

• Divergence Signals: The script identifies both regular and hidden divergences based on VuManChu Cipher B logic. Regular divergences (red/green dots) suggest potential reversals, while hidden divergences can signal trend continuation.
• HARSI Candles: By calculating Heikin Ashi values from RSI data, the indicator filters market noise and highlights trend strength. Users should look for HARSI transitions in extreme OB/OS zones (typically above 50 or below -50).
• WaveTrend Confluence: The WaveTrend component tracks momentum shifts. A signal is most potent when a WaveTrend cross occurs simultaneously with a HARSI exhaustion signal in an OB/OS area.
• 3-Line Strike (3LS): The script includes visual labels for specific candlestick patterns, such as the 3-Line Strike, which serves as an additional filter for trend momentum.

Details

The script integrates several open-source methodologies to provide a unified overlay:

• HARSI Logic: Uses the RSI-based Heikin Ashi calculation popularized by JayRogers to create candles that represent momentum rather than just price.
• Divergence Detection: Utilizes a fractal-based approach to compare price peaks/troughs with those of the WaveTrend (WT2) line or the standard RSI.
• Alert Mechanics: Divergence alerts require two bars to confirm the fractal. For optimal timing, it is recommended to set alerts to "Once Per Bar" to avoid the additional delay associated with the bar close.

Settings

Config » RSI Plot

• Source: The price data used for the underlying RSI calculations.
• Length: The lookback period for the RSI component.
• Mode: Toggles between smoothed and standard RSI modes.
• Show Plot/Histogram: Controls the visibility of the RSI-based visual elements.

Config » OB/OS Boundaries

• Upper/Lower: Defines the primary overbought and oversold thresholds.
• Upper X/Lower X: Defines secondary, more extreme exhaustion levels.

WaveTrend Settings

• WT Channel Length: The period used for the EMA of price in the WaveTrend calculation.
• WT Average Length: The period used to smooth the WaveTrend oscillator.
• WT Show Divergence: Enables or disables the visual plotting of momentum divergences.

Pattern Settings

• Show Bear/Bull 3LS: Toggles the visibility of the 3-Line Strike candlestick pattern labels.

FAQ

How do I access Overlay - HARSI + Divergences?

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

Why do divergence signals appear two bars late?

Divergence detection relies on fractals, which require a high/low point to be flanked by two lower highs or higher lows. This two-bar delay is necessary to confirm that a peak or trough has actually formed.

Which timeframes are best for this indicator?

While the script works on all timeframes, it is frequently used on the 1-minute and 5-minute charts for scalping, where noise reduction from the HARSI candles is most beneficial.

Disclaimer: Any trade decisions you make are entirely your own responsibility.