RSI Divergence Detector

The RSI Divergence Detector indicator provides a continuous expression of divergence magnitude by aggregating bullish, bearish, and hidden divergence signals across multiple lookback lengths. It calculates a unified metric that represents the intensity of market discrepancies between price action and the Relative Strength Index (RSI) at every point in time.

Usage

The tool is primarily used as a momentum filter or reversal identifying aid. Unlike traditional divergence indicators that plot lines on the chart, this script outputs a histogram where the height represents the aggregated magnitude of all detected valid divergences.

The color of the histogram columns indicates the specific type of divergence detected:

• Green: Standard Bullish Divergence.
• Maroon: Standard Bearish Divergence.
• Lime/Light Green: Hidden Bullish Divergence.
• Dark Pink: Hidden Bearish Divergence.

Details

A divergence is considered valid when a line drawn on the source series (price) and a line on the RSI oscillator have slopes with opposite signs. Furthermore, these lines must not cross their respective series during the divergence period.

The indicator achieves its unique "magnitude" metric by normalizing the changes in price and the oscillator into a 0-100 range and summing these values over a user-defined range of lengths. This provides a smoother, more comprehensive view of divergence compared to tools that only look for a single fixed-length pattern.

Users should be aware that divergences detected in real-time are "building" and may be invalidated or increase in magnitude before the price action completes its move.

Settings

• Source: The price data used for calculation (default is Close).
• RSI Length: The lookback period for the underlying RSI oscillator.
• Minimum Divergence Length: The shortest window to search for price/oscillator discrepancies.
• Maximum Divergence Length: The longest window to search for price/oscillator discrepancies.

FAQ

How do I use the RSI Divergence Detector?

The indicator is used to spot potential trend reversals or continuations by looking at the color and height of the histogram. A higher bar indicates a stronger mathematical discrepancy between price and momentum.

Does the magnitude of the divergence predict the success rate?

While the indicator reflects the mathematical intensity of the divergence, it does not necessarily mean a higher magnitude guarantees a higher probability of the trade playing out.

How can I access RSI Divergence Detector?

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