Prices / RSI divergences detector

The Prices / RSI divergences detector tool is a specialized technical indicator designed to automatically identify and plot both regular and hidden divergences between price action and the Relative Strength Index (RSI). This script helps traders spot potential trend reversals or continuations by highlighting discrepancies in momentum and price levels directly on the chart.

Usage

The tool is used to monitor momentum shifts that are not immediately apparent on a standard price chart. It plots labels and shapes at fractal points where a divergence is confirmed.

• Regular Bullish Divergence: Occurs when the price makes a lower low, but the RSI makes a higher low. This suggests a potential bullish reversal.
• Regular Bearish Divergence: Occurs when the price makes a higher high, but the RSI makes a lower high. This suggests a potential bearish reversal.
• Hidden Bullish Divergence: Occurs when the price makes a higher low, but the RSI makes a lower low. This often indicates a bullish trend continuation.
• Hidden Bearish Divergence: Occurs when the price makes a lower high, but the RSI makes a higher high. This often indicates a bearish trend continuation.

Users can toggle specific types of divergences on or off to clean up the chart and focus on specific setups.

Details

The script utilizes a fractal-based detection method to find significant peaks and troughs in the RSI. By comparing the price levels at these RSI-defined points to previous peaks or troughs, the indicator determines if a divergence has occurred.

The detection logic looks back over a series of candles (using a 2-bar offset for confirmation) to ensure the peak or trough is localized. Specifically, it uses two different RSI calculations: one based on the high source and one based on the low source, ensuring that bearish divergences are checked against price highs and bullish divergences against price lows.

Settings

• Show Labels: Toggles the visibility of the "R" (Regular) and "H" (Hidden) labels on the chart.
• Show Channel: Displays a silver-colored visual path connecting the fractal points detected by the indicator.
• Show Hidden Divergence: Enables or disables the detection and display of hidden bullish and bearish divergences.
• Show Regular Divergence: Enables or disables the detection and display of regular bullish and bearish divergences.
• RSI length: Sets the period for the Relative Strength Index calculation (default is 14).
• High Source: The price source used to calculate the RSI for bearish divergence detection (default is High).
• Low Source: The price source used to calculate the RSI for bullish divergence detection (default is Low).

FAQ

How do I access Prices / RSI divergences detector?

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

What is the difference between "R" and "H" labels?

The "R" label stands for Regular Divergence, which typically signals a potential reversal in the current trend. The "H" label stands for Hidden Divergence, which typically signals a continuation of the prevailing trend.

Why are labels appearing two bars late?

The script uses fractal detection, which requires a certain number of bars to confirm that a peak or trough has formed. This ensures higher accuracy and prevents signals from repainting once the bar is closed.