Price Divergence (ps4)

The Price Divergence (ps4) indicator identifies potential market reversals by detecting regular and hidden divergences between price action and multiple technical oscillators. By aggregating signals from eight distinct factors, it provides a comprehensive overview of momentum and volume shifts directly on the price chart.

Usage

The script can be used to identify trend exhaustion or continuation patterns. When a divergence is detected, the indicator plots a circle at the relevant fractal high or low. If the "Show Channel" option is enabled, it connects these points to visualize the price structure.

• Bullish Divergence: Indicated by green circles, occurring when price makes lower lows while an oscillator makes higher lows (regular) or when price makes higher lows while an oscillator makes lower lows (hidden).
• Bearish Divergence: Indicated by red circles, occurring when price makes higher highs while an oscillator makes lower highs (regular) or when price makes lower highs while an oscillator makes higher highs (hidden).

Because this tool uses multiple factors, a cluster of signals at a specific price level often indicates a stronger probability of a reversal.

Details

The indicator calculates divergences based on the following eight factors:

1. Relative Strength Index (RSI)
2. Stochastic RSI
3. Moving Average Convergence Divergence (MACD)
4. Stochastic Oscillator
5. Volume Moving Average (Volume MA)
6. Accumulation/Distribution (Acc/Dist)
7. Fisher Transform
8. Commodity Channel Index (CCI)

The script utilizes a fractal-based detection method, specifically looking for 5-bar fractal tops and bottoms to determine pivot points for comparison.

Settings

• RSI/Stoch/Volume MA/Acc. Dist./Fisher Transform/CCI Lookback: Sets the period length for the majority of the underlying oscillators.
• MACD Source: Determines the price source used for MACD calculations (e.g., Close).
• MACD Fast/Slow/Smooth Signal: Parameters for the internal MACD calculation.
• RSI Stoch (RSI/Stoch/K Length): Specific lookback and smoothing settings for the Stochastic RSI component.
• Show Channel: A toggle to connect the detected fractal points with lines, helping to visualize price channels and trend directions.

FAQ

How do I use the multi-factor signals?

When several dots appear at the same fractal point, it means multiple oscillators (like RSI and MACD) are signaling a divergence simultaneously, which usually suggests a higher conviction signal.

What is the difference between the colors?

Green circles represent bullish signals (potential upward movement), while red circles represent bearish signals (potential downward movement).

How can I access Price Divergence (ps4)?

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