Divergence Indicator (any oscillator)

The Divergence Indicator (any oscillator) tool identifies regular and hidden divergences between price action and any user-selected technical oscillator to highlight potential trend reversals or continuations.

Usage

The Divergence Indicator (any oscillator) is designed for flexibility, allowing traders to detect divergences on various external inputs like RSI, TSI, or CMF. To use the script, users should first add their preferred oscillator to the chart, then apply this indicator specifically to that oscillator's pane. By adjusting the "Indicator" source in the settings, the tool can track the specific plot of the chosen oscillator.

Common use cases include:

• Trend Reversal Identification: Spotting regular bullish or bearish divergences where price makes a new extreme but the oscillator does not.
• Trend Continuation Identification: Detecting hidden divergences which often suggest the prevailing trend will persist.
• Multi-Pane Visualization: Users can apply the script directly to the price chart while linking it to an oscillator's data, allowing divergence labels to appear on the price candles by enabling the "Plot on price" setting.

Details

The script functions by identifying pivot highs and pivot lows in both price and the selected oscillator. A divergence is confirmed when the directional movement of price pivots disagrees with the directional movement of the oscillator pivots over a specific lookback range.

The tool supports four types of signals:

1. Regular Bullish: Price makes a Lower Low while the oscillator makes a Higher Low.
2. Hidden Bullish: Price makes a Higher Low while the oscillator makes a Lower Low.
3. Regular Bearish: Price makes a Higher High while the oscillator makes a Lower High.
4. Hidden Bearish: Price makes a Lower High while the oscillator makes a Higher High.

The script includes a "Delay plot until candle is closed" feature to ensure signals are confirmed by price action before appearing, which prevents the recalculation or "repainting" of signals on the current active bar.

Settings

General Settings

• Plot on price (rather than on indicator): When enabled, divergence labels and lines are projected onto the main price chart instead of the oscillator pane.
• Indicator: The source input used to calculate divergences (e.g., RSI, Stochastic, or custom oscillator plots).
• Pivot Lookback Right: The number of bars to the right of a peak or trough required to confirm a pivot point.
• Pivot Lookback Left: The number of bars to the left of a peak or trough required to confirm a pivot point.
• Max of Lookback Range: The maximum number of bars allowed between the current pivot and the previous pivot to qualify for a divergence.
• Min of Lookback Range: The minimum number of bars required between pivots to qualify for a divergence.
• Delay plot until candle is closed: Prevents signals from appearing until the bar has closed to ensure data stability.

Visibility Settings

• Plot Bullish: Enables or disables the display of regular bullish divergence signals.
• Plot Hidden Bullish: Enables or disables the display of hidden bullish divergence signals.
• Plot Bearish: Enables or disables the display of regular bearish divergence signals.
• Plot Hidden Bearish: Enables or disables the display of hidden bearish divergence signals.

FAQ

How do I link this to a specific oscillator?
In the script settings, navigate to the "Indicator" dropdown and select the specific output plot from the oscillator you have already loaded on your chart.

Why do signals appear a few bars late?
Signals depend on "Pivot Lookback" settings. The script must wait for a specific number of bars (defined by the Lookback Right setting) to confirm that a high or low is indeed a pivot.

How can I get access to the Divergence Indicator (any oscillator)?
You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.