Obsidian Divergence Ledger

The Obsidian Divergence Ledger indicator is a comprehensive divergence engine built around confirmed pivot logic and a composite oscillator designed to provide a structured view of market exhaustion and continuation. By combining multiple oscillator types with volatility and trend filters, it aims to transform vague visual impressions of divergence into actionable, confirmed technical structures.

Usage

The script is designed for traders who prioritize structural confirmation over early, unconfirmed signals. Use the State and Freshness parameters to identify when a divergence has been verified by the pivot engine.

• Reversal Analysis: Look for Regular Bullish (lower low in price, higher low in oscillator) or Regular Bearish (higher high in price, lower high in oscillator) signals to identify potential trend exhaustion.
• Continuation Analysis: Use Hidden Bullish or Hidden Bearish signals to identify potential trend pullbacks where the momentum maintains its primary direction.
• Contextual Filtering: The tool allows you to filter signals through Volatility Expansion and Baseline Context. A signal is considered high-probability if it aligns with the directional bias of the baseline and occurs during a period of expanding volatility.
• Visualizing Structure: Enable Price Overlay Lines and Context Zones to see the exact relationship between price pivots and oscillator peaks/troughs. This helps distinguish meaningful structural shifts from minor local noise.

Details

This tool utilizes a unique composite oscillator construction, blending RSI, CMO, and ROC into a single normalized and smoothed source. This multi-indicator approach reduces single-indicator bias and provides a more robust foundation for divergence detection. Unlike "loose" divergence tools, this script requires explicit confirmation from ta.pivothigh() and ta.pivotlow() before a signal is triggered. While this introduces a small lag equal to the Right Bars setting, it ensures that the detected structure is stable and non-repainting.

Settings

Composite Oscillator

• RSI/CMO/ROC Lengths: Adjust the lookback period for the individual components of the composite oscillator.
• Normalization Window: Sets the period used to scale the oscillators to a consistent 0-100 range.
• Oscillator Smoothing: Determines the amount of EMA smoothing applied to the final composite value.

Divergence Engine

• Pivot Left/Right Bars: Controls the sensitivity of pivot detection. Higher values require more surrounding bars to confirm a peak or trough.
• Enable Hidden Divergence: Toggles the detection of continuation-style (hidden) divergence.
• Max Ledger Lines: Limits the number of historical divergence lines drawn on the chart.

Quality Filters

• Require Volatility Expansion: When enabled, signals are only valid if current ATR is above its moving average.
• Require Baseline Context: Filters signals based on their position relative to a baseline (e.g., only bullish signals when price is above the baseline).
• Minimum Oscillator Pivot Spread: Sets a minimum vertical distance required between two oscillator pivots to qualify as a divergence.

FAQ

How do I access Obsidian Divergence Ledger?

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

Why does the signal appear a few bars after the pivot?

The indicator uses confirmed pivot logic. It must wait for the "Right Bars" count to pass to ensure the high or low point is truly a pivot, preventing the signal from repainting or disappearing.

What is the difference between Regular and Hidden divergence?

Regular divergence indicates a potential trend reversal (exhaustion), while Hidden divergence typically suggests a trend continuation (momentum building during a pullback).