Building Divergence Signals with Oscillator Pivots

Summary

This indicator template explains how to detect regular and hidden bullish or bearish divergences by comparing price pivots with an oscillator series. The oscillator input is replaceable, with RSI offered as an example and CCI or a custom indicator also suggested. A pivot-period setting determines the swing size used for candidate highs and lows: larger values search for broader swings.

A confirmation setting controls how many bars to wait before alerting. Waiting longer can reduce false signals but delays notification, so the choice balances timeliness against confirmation. The document also highlights an important limitation: pivot-based signals need future bars to confirm a recent turning point, so historical signals can be revised over a span tied to the pivot period. It presents an indicator construction template, not performance testing or evidence that divergence signals are profitable.

Key ideas

• The template compares oscillator pivots with price pivots to identify regular and hidden divergences.
• The oscillator input can be replaced, and RSI is only one example.
• Larger pivot periods focus on broader swings and require waiting for confirmation.
• Waiting for alert confirmation may reduce false signals while making alerts later.
• Pivot confirmation can revise recent historical signals, creating repaint risk.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.