RSI Divergence Entries with Extreme-Zone and Higher-Timeframe Filters

Summary

This strategy looks for regular RSI divergence at price swing points. A bearish setup pairs a higher price high with a lower RSI high; a bullish setup pairs a lower price low with a higher RSI low. At least one of the paired RSI pivots must reach the configured overbought or oversold threshold, and the earlier pivot must fall within the maximum lookback. Pivots use a configurable left-and-right bar window, so signals are identified only after the right-side bars have formed.

Entries can be filtered by the prior completed higher-timeframe close relative to its EMA, with long signals requiring an uptrend and shorts a downtrend. Opposite divergence signals close an open position, while chart labels mark the signal bar. The document provides implementation details but no performance results, market tests, or evidence of profitability. It also leaves trade sizing at a fixed share of equity and gives no explicit stop-loss or target; results will depend on instrument, 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.
• A divergence qualifies only when one of its RSI pivots reaches the configured extreme threshold.
• The higher-timeframe filter compares the previous completed close with its EMA before allowing entries.
• Pivot confirmation requires bars after the turning point, so the signal is recognized with delay.
• Opposite divergence closes an existing position, but the script specifies no explicit stop-loss or profit target.

Tags

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