RSI Divergence Entries with an EMA Trend Filter and ATR Exits
Summary
This backtestable strategy looks for bullish and bearish divergences between price swing points and RSI. A bullish setup pairs a lower price low with a higher RSI low; a bearish setup pairs a higher price high with a lower RSI high. Swing pivots require bars on both sides for confirmation, so the signal is recognized after the pivot has formed. An optional filter requires the first RSI pivot to be overbought or oversold.
When enabled, an EMA filter permits longs above the trend average and shorts below it. The strategy can use an ATR-based stop and a configurable risk-to-reward target, and it also offers an ATR trailing stop. The description recommends tuning pivot settings to the instrument and evaluating costs and slippage in the Strategy Tester. It supplies no performance results or independent evidence for its claims about win rates; outcomes will depend on market, timeframe, settings, and execution assumptions.
Key ideas
- Bullish divergence pairs a lower price low with a higher RSI low, while bearish divergence pairs a higher price high with a lower RSI high.
- Swing pivots are confirmed using bars to the right, which delays recognition of a divergence.
- An optional EMA filter aligns long and short entries with the prevailing price position relative to the average.
- ATR stops, optional fixed reward targets, and optional trailing exits provide configurable trade management.
- The document offers no tested performance figures, so results require instrument-specific evaluation with realistic costs.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.