Bullish Divergence Short-term Long Trade Finder

The Bullish Divergence Short-term Long Trade Finder indicator is designed to identify high-probability long entry points on Bitcoin by detecting bullish divergence patterns followed by specific RSI conditions. It aims to capture short-term upward movements when the asset is in an oversold territory relative to higher timeframe trends.

Usage

This tool can be used to automate the identification of bullish and bearish divergences on the RSI.

• Long Entry: The script triggers a "Buy" signal when it detects a bullish divergence (price making a lower low while RSI makes a higher low) provided the 1-hour RSI value is below 40.
• Exit Conditions: A long position is closed if a bearish divergence occurs, if the RSI reaches the user-defined "RSI Sell Value" (default 75), or if the price drops below the "Stop Loss Percentage" (default 5%).
• Timeframe Optimization: While versatile, the script is optimized for the 7-minute and 15-minute timeframes for Bitcoin (BTC/USD or BTC/USDT) to capture short-term volatility.

Details

The script utilizes a look-back mechanism to find pivot lows and highs in the RSI relative to price action. A unique aspect of this tool is the cross-timeframe filter; it checks the 1-hour RSI to ensure the entry occurs during broader oversold conditions, increasing the likelihood of a successful bounce. The strategy logic requires a confirmative pivot to be established before a signal is plotted, ensuring that the divergence is structurally sound.

Settings

RSI Configuration

• RSI Length: Sets the period for the Relative Strength Index calculation (default 14).
• RSI Oversold Level: The level used to mark the oversold threshold on the chart (default 30).
• RSI Overbought Level: The level used to mark the overbought threshold on the chart (default 70).

Condition Filters

• RSI Bull Condition Minimum: The maximum RSI value allowed for a pivot low to be considered for a bullish divergence (default 40).
• RSI Bearish Condition Minimum: The minimum RSI value required to begin looking for a bearish divergence (default 50).
• RSI Bearish Condition Sell Min: The minimum RSI value required for a bearish divergence to trigger an exit (default 60).
• Look Back this many candles: The number of historical bars the script scans to identify previous pivot points (default 25).

Strategy Controls

• RSI Sell Value: A fixed RSI threshold that triggers a take-profit exit for long positions (default 75).
• Stop loss Percentage: The percentage below the entry price where the trade will automatically close to limit risk (default 5%).

FAQ

How do I use this indicator?

Simply add it to your chart, preferably on BTC/USDT using the 15-minute timeframe. Look for the "BUY" labels for entries and "Sell" labels for exits based on divergence or RSI overextension.

Can I use this on other assets?

While specifically tuned for Bitcoin, the parameters can be adjusted to accommodate altcoins or other volatile assets by modifying the RSI thresholds and look-back periods.

How can I get access to the Bullish Divergence Short-term Long Trade Finder?

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