Divergence RSI-VWAP

The Divergence RSI-VWAP indicator tool combines the Relative Strength Index of the Volume Weighted Average Price with an automated divergence detection system to identify potential trend reversals based on price and volume momentum.

Usage

The indicator can be used to identify overextended market conditions and momentum shifts through the following features:

• RSI-VWAP Line: Monitors momentum by applying the RSI calculation to the VWAP. When the line enters the overbought (typically >80) or oversold (typically <20) zones, the plot color changes to indicate potential exhaustion.
• Divergence Signals: The script automatically labels "BULL" and "BEAR" divergences. A bullish divergence occurs when price makes a lower low but the RSI-VWAP makes a higher low. Conversely, a bearish divergence occurs when price makes a higher high but the RSI-VWAP makes a lower high.
• Pivot Detection: "PIVOT" labels highlight local peaks and troughs in the oscillator, helping traders identify structural turns in momentum.
• Visual Customization: Users can toggle labels on/off, switch to shorter label formats, or use background highlights instead of labels for a cleaner chart aesthetic.

Details

The script calculates the RSI of the Volume Weighted Average Price (VWAP) rather than standard price data. This integration allows the oscillator to account for volume distribution, providing a more comprehensive view of market conviction compared to standard RSI. The divergence logic compares the highest highs and lowest lows of both the price and the RSI-VWAP over a user-defined lookback period.

Settings

• RSI-VWAP Length: Sets the lookback period for the RSI-VWAP calculation.
• RSI-VWAP Oversold/Overbought: Defines the threshold levels for overextended conditions.
• Hide Pivots?: Toggle to show or hide the "PIVOT" labels on the oscillator.
• Shorter Labels?: If enabled, removes the text from labels, leaving only the shape for a more minimalist look.
• Hide Labels and Color Background: Replaces text labels with background color highlights when signals are detected.
• Div Lookback Period (Bars)?: Determines the number of bars used to look back for identifying highs and lows for divergence detection.

FAQ

How do I use the Divergence RSI-VWAP?

You can look for "BULL" or "BEAR" labels which indicate a discrepancy between price action and volume-weighted momentum, often signaling a reversal.

What is the difference between this and regular RSI?

Unlike regular RSI which only uses price, this indicator uses VWAP as its source, meaning it incorporates volume into the oscillator's movement.

How can I access this script?

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