HARSI + Divergences

The HARSI + Divergences indicator is a versatile technical analysis tool that combines Heikin-Ashi RSI candles with WaveTrend-based divergence detection to identify potential trend reversals and exhaustion points. It simplifies market noise by integrating multiple momentum oscillators into a single, cohesive visual interface.

Usage

The script is primarily used to identify high-probability reversal setups through the confluence of RSI exhaustion and oscillator divergences.

• HARSI Candles: Unlike standard price candles, these are calculated based on RSI values, helping traders visualize momentum trends and strength.
• Divergence Detection: The indicator plots dots when it detects regular or hidden divergences between price and the WaveTrend oscillator. These often signal potential trend shifts, especially when occurring in overbought (OB) or oversold (OS) zones.
• Confluence Trading: A common strategy involves looking for "Buy" or "Sell" dots that appear while the HARSI candles are in extreme OB/OS levels.
• MFI Integration: The Money Flow Index (MFI) area provides a background visual for volume-weighted momentum, aiding in confirming the overall trend direction.

Details

The indicator refines several open-source concepts:

1. HARSI Construction: It calculates a Heikin-Ashi version of the Relative Strength Index. This involves smoothing the 'Open' value to reduce volatility and highlight the prevailing momentum bias.
2. WaveTrend Oscillator: Based on the classic WaveTrend (WT) calculation, it provides a fast and slow line crossover system.
3. Divergence Logic: The script uses fractal-based pivot detection to compare price peaks/troughs with oscillator peaks/troughs, identifying both regular (reversal) and hidden (continuation) divergences.

Settings

Config » HARSI Candles

• Length: The period used for the internal RSI calculations.
• Open Smoothing: Controls the bias toward previous open values; higher values create smoother candle transitions.
• Colour Palette: Customizable colors for bullish/bearish candles and wicks.

Config » RSI Plot

• Source: The price data source (default is OHLC4).
• Length: The RSI period for the secondary RSI plot.
• Smoothed Mode RSI?: Toggle between standard RSI output and a smoothed version.

Config » OB/OS Boundaries

• OB / OB Extreme: Sets the thresholds for overbought levels.
• OS / OS Extreme: Sets the thresholds for oversold levels.

WaveTrend & Divergences

• Show WaveTrend: Toggles the visibility of the WT lines.
• Show Regular/Hidden Divergences: Enables the detection and plotting of divergence dots.
• WT Channel/Average Length: Parameters for the WaveTrend calculation.
• WT 2nd Regular Divergences: Allows for a secondary sensitivity layer for divergence detection.

RSI + MFI

• Show MFI: Toggles the background MFI area.
• MFI Period/Multiplier: Adjusts the calculation period and visual scaling of the MFI.

FAQ

How do I access the HARSI + Divergences indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

What timeframe is best for this indicator? While it works on all timeframes, the original concept suggests it is particularly effective on lower timeframes like the 1-minute for Forex scalping.

Why are the signals sometimes delayed? Divergence signals require a fractal confirmation (checking bars to the left and right), which naturally introduces a small calculation lag to ensure the pivot is valid.