RSI Divergence Entries with Threshold-Based Exits

Summary

This strategy pairs RSI thresholds with regular price–RSI divergence to identify possible turning points. A bullish signal occurs when price makes a lower low while RSI makes a higher low, with RSI below the configurable long-entry level. A bearish signal requires a higher price high, a lower RSI high, and RSI above the short-entry level. Long and short positions close when RSI reaches their respective exit thresholds. The document gives default entry and exit levels and describes pivot-based divergence detection using a five-bar lookback.

The material focuses on rules, chart annotations, and suggested extensions rather than measured results; it provides no backtest outcomes. It identifies strong trends as a risk because reversal signals may fail, and notes that RSI lag, parameter sensitivity, false divergences, commissions, and slippage can affect live performance. Suggested improvements include higher timeframe and volume confirmation, price-based stops, and market-regime filters. The described strategy does not include those proposed additions.

Key ideas

• A bullish divergence pairs a lower price low with a higher RSI low; a bearish divergence pairs a higher price high with a lower RSI high.
• Entries require both a divergence signal and RSI to cross the configured entry threshold.
• RSI exit thresholds close long and short positions, while divergence detection uses pivot comparisons.
• The writeup reports no performance results and warns that strong trends, lag, parameter choices, and trading costs can undermine signals.

Tags

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