Fib Divergence System

The Fib Divergence System indicator provides a comprehensive technical analysis suite that combines Percentage Price Oscillator (PPO) divergences, Fibonacci retracement levels, and volatility-based trend channels. It is designed to identify potential trend reversals and key support/resistance zones by merging multiple momentum and price action methodologies into a single overlay.

Usage

The tool displays several distinct components on the chart to assist in trade identification:

• Divergence Signals: "P" labels appear when the script detects a divergence between price action and the PPO oscillator. Bullish signals (green) indicate potential upward reversals, while bearish signals (red) indicate potential downward reversals.
• PPO High/Low Triangles: Small triangles mark local peaks and troughs in the PPO, helping traders identify momentum exhaustion.
• Fibonacci Levels: Horizontal lines represent key Fibonacci ratios (0.236, 0.382, 0.500, etc.) calculated over a long-term lookback period, serving as static support and resistance.
• Time and Money Channels (TMC): Dynamic volatility bands surround the price, providing a "minor term average" and multiple deviation levels to identify overextended price conditions.
• Linear Regression: A smooth red line plots the linear regression curve to highlight the immediate trend direction.

Details

The system utilizes a smoothed Percentage Price Oscillator (PPO) to find divergences. It calculates regular divergences as well as optional long-term divergences based on a user-defined lookback period. The Fibonacci levels are anchored to significant fractals (highs and lows) found within the specified "Fib Period," ensuring the levels adapt to major market structural shifts. The volatility channels (TMC) use a square root variance calculation of price relative to its moving average to create adaptive boundaries.

Settings

General Settings

• Show PPO high/low triangles?: Toggles the visibility of the small momentum peak/trough triangles.
• Use long term divergences?: Enables the detection of divergences over a broader period.
• Lookback Period: Sets the window for determining long-term divergence filters.
• Fib Period: Determines the number of bars used to find the highest and lowest points for Fibonacci level calculation.
• TMC Length: Adjusts the window for the Time and Money Channel volatility bands.
• Linear Regression Length: Changes the period for the Linear Regression Curve.

PPO Settings

• PPO Fast/Slow/Signal: Standard EMA lengths for the PPO oscillator calculation.
• PPO Smooth: Applies smoothing to the PPO value to filter out minor noise.

FAQ

How do I use the divergence signals?

Divergence signals ("P" labels) suggest that price momentum is decoupling from price direction, often preceding a reversal. Traders typically look for these signals near Fibonacci levels or the outer TMC bands for higher-probability setups.

What do the red and green horizontal lines represent?

The blue/green lines are standard and extension Fibonacci levels (support), while the red lines represent inverse extensions (resistance), providing targets for profit-taking or entries.

How can I access the Fib Divergence System?

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