Divergence Awesome Oscillator

The Divergence Awesome Oscillator indicator automatically detects and labels regular and hidden divergences between price action and the Awesome Oscillator. This tool is designed to help traders identify potential trend reversals and trend continuations by highlighting discrepancies between momentum and price movement.

Usage

The tool identifies four types of divergences, each marked with a specific label on the oscillator:

• Regular Bullish Divergence: Indicated by a "D" label in green. This occurs when price makes a lower low while the oscillator makes a higher low, suggesting a potential upward reversal.
• Regular Bearish Divergence: Indicated by a "D" label in red. This occurs when price makes a higher high while the oscillator makes a lower high, suggesting a potential downward reversal.
• Hidden Bullish Divergence: Indicated by an "H" label in green. This occurs when price makes a higher low but the oscillator makes a lower low, often signifying trend continuation.
• Hidden Bearish Divergence: Indicated by an "H" label in red. This occurs when price makes a lower high but the oscillator makes a higher high, often signifying trend continuation.

Traders can use these signals to validate entry points or manage existing positions based on momentum shifts.

Details

The script calculates the Awesome Oscillator (AO) as the difference between a fast and slow Simple Moving Average (SMA) of the median price (HL2). Divergences are identified using pivot points. A pivot is confirmed once the specified "Pivot Lookback Right" number of bars has passed without a more extreme value, meaning labels will appear with a slight delay equal to the lookback period. The "Lookback Range" settings determine the minimum and maximum distance between two pivots to be considered for a divergence.

Settings

Awesome Oscillator Settings

• AO Fast SMA Length: Sets the period for the fast simple moving average (default is 5).
• AO Slow SMA Length: Sets the period for the slow simple moving average (default is 34).
• LRS Source: The price source used for calculations (default is HL2).

Pivot Settings

• Pivot Lookback Right: The number of bars to the right of a pivot required for confirmation.
• Pivot Lookback Left: The number of bars to the left of a pivot required for confirmation.
• Max of Lookback Range: The maximum number of bars allowed between two pivots to trigger a divergence.
• Min of Lookback Range: The minimum number of bars allowed between two pivots to trigger a divergence.

Visibility Settings

• Plot Bullish: Toggles the visibility of regular bullish divergence labels.
• Plot Hidden Bullish: Toggles the visibility of hidden bullish divergence labels.
• Plot Bearish: Toggles the visibility of regular bearish divergence labels.
• Plot Hidden Bearish: Toggles the visibility of hidden bearish divergence labels.

FAQ

How do I access Divergence Awesome Oscillator?

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

Why do the labels appear several bars late?

Labels are based on pivot points, which require a "Lookback Right" period to confirm that a high or low has actually been formed. This ensures the signal is based on a confirmed structural point rather than temporary noise.

Can I change the sensitivity of the divergence detection?

Yes, by adjusting the "Pivot Lookback" and "Lookback Range" settings, you can make the indicator more or less sensitive to price swings and momentum changes.