RSX Divergence

The RSX Divergence indicator provides a noise-filtered version of the Relative Strength Index (RSI) with integrated divergence detection to help identify potential trend reversals without the usual lag of smoothing filters.

Usage

The RSX Divergence tool can be used to identify trend exhaustion and potential reversal points. Users can monitor the RSX line as it moves between overbought (OB) and oversold (OS) zones.

• Divergences: The script automatically plots labels for "Bull" and "Bear" divergences. A bullish divergence occurs when price makes a lower low but the RSX makes a higher low. A bearish divergence occurs when price makes a higher high but the RSX makes a lower high.
• Overbought/Oversold: Breakouts into these zones can be highlighted visually, signaling potential market extremes.
• Pivots: The indicator can display pivot points on the RSX line to help identify significant structural shifts within the oscillator.

Details

This script is based on the Jurik RSX implementation, which is a sophisticated "noise-free" version of the RSI. Unlike standard RSI which can be choppy or moving averages that introduce lag, the RSX algorithm aims to provide a smooth output while remaining responsive to price action. The divergence logic integrated into this version helps traders spot discrepancies between momentum and price, which are often leading indicators of a change in market direction.

Settings

• Length: Sets the period for the RSX calculation (default is 14).
• Source: Determines the price data used for calculation (default is HLC3).
• OB Level: Sets the threshold for the overbought zone.
• OS Level: Sets the threshold for the oversold zone.
• Highlight Breakouts: Toggles background coloring when RSX enters OB or OS zones.
• Hide pivots: Allows users to remove pivot labels from the oscillator for a cleaner look.
• Shorter labels: Replaces text labels (Bull/Bear) with compact triangle icons.
• Div lookback period (bars): Sets the number of bars to look back for identifying highs and lows for divergence detection.

FAQ

How do I access the RSX Divergence indicator?

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

What makes RSX different from standard RSI?

RSX utilizes a Jurik-inspired smoothing technique that removes high-frequency "noise" from the oscillator without adding the significant lag typically associated with moving averages.

Can I set alerts for the divergences?

Yes, the script includes alert conditions for Bullish and Bearish divergences, as well as crossovers of the Overbought and Oversold levels.