DivAlgo

DIVERGENCE DETECTION STRATEGY

Quick Facts:

• Category: Divergence / Momentum
• Markets: All markets
• Timeframes: 1H, 4H, Daily

Overview

The DivAlgo identifies divergences between price action and momentum oscillators —a powerful signal that often precedes significant reversals. The algorithm supports multiple oscillators (RSI, MACD, Stochastic, CCI) and detects both regular and hidden divergences.

Divergence occurs when price makes a new high/low but the oscillator fails to confirm, indicating weakening momentum and potential reversal.

How It Works

OSCILLATOR CALCULATION Choose from multiple oscillators:

• RSI: ta.rsi(close, rsiPeriod)
  • MACD: MACD histogram
  • Stochastic: Stochastic %K
  • CCI: ta.cci(close, cciPeriod)

PIVOT DETECTION Identify pivots on both price and oscillator:

• Price Pivot High: ta.pivothigh(high, pivotLookback, pivotLookback)
  • Price Pivot Low: ta.pivotlow(low, pivotLookback, pivotLookback)
  • Oscillator pivots detected similarly

DIVERGENCE DETECTION

REGULAR BULLISH DIVERGENCE:

• Price makes lower low
  • Oscillator makes higher low
  • Signals bullish reversal

REGULAR BEARISH DIVERGENCE:

• Price makes higher high
  • Oscillator makes lower high
  • Signals bearish reversal

HIDDEN BULLISH DIVERGENCE (Optional):

• Price makes higher low
  • Oscillator makes lower low
  • Signals trend continuation

HIDDEN BEARISH DIVERGENCE (Optional):

• Price makes lower high
  • Oscillator makes higher high
  • Signals trend continuation

CONFIRMATION Optional filters for divergence validity:

• Minimum divergence angle
  • Maximum pivot distance (bars between pivots)
  • Oscillator level filter (only oversold/overbought)

Key Parameters

OSCILLATOR:

• oscillator ("RSI"): "RSI", "MACD", "Stochastic", "CCI"
  • rsiPeriod (14): RSI period
  • macdFast/macdSlow/macdSignal: MACD parameters
  • stochPeriod (14): Stochastic period
  • cciPeriod (20): CCI period

PIVOT DETECTION:

• pivotLookback (5): Bars on each side for pivot
  • maxPivotDistance (50): Maximum bars between pivots

DIVERGENCE TYPES:

• regularDivergence (true): Trade regular divergences
  • hiddenDivergence (false): Trade hidden divergences

FILTERS:

• oscLevelFilter (true): Only trade at extreme osc levels
  • rsiBullThreshold (30): RSI level for bullish signals
  • rsiBearThreshold (70): RSI level for bearish signals

Best Use Cases

✅ REVERSAL DETECTION at extended moves ✅ TREND EXHAUSTION identification ✅ MULTI-TIMEFRAME divergence confirmation ✅ CONFLUENCE with other reversal signals