RSI Divergence Signals for Long and Short Trades

Summary

This strategy uses a 13-period RSI on closing prices to identify divergences between price pivots and RSI pivots. It signals a potential long when price makes a lower low while RSI makes a higher low, and a potential short when price makes a higher high while RSI makes a lower high. The specified pivot lookbacks differ by direction: the bullish setup uses 14 bars to the left and 2 to the right, while the bearish setup uses 47 to the left and 1 to the right. Daily RSI thresholds also filter entries.

The documented settings include RSI-level profit targets and configurable percentage, ATR, Fibonacci, or disabled stop types; the source specifically implements percentage and ATR trailing stops, with exits also possible on an opposite divergence when stops are disabled. Published backtest settings describe BTC/USDT futures on a 3-hour chart over January 2024, but no performance results are supplied. Divergence can precede a reversal by an uncertain interval or fail altogether, and pivot confirmation requires bars to the right, so signals are not available immediately at the pivot. The document offers no evidence that the approach is profitable.

Key ideas

• A bullish signal pairs a lower price low with a higher RSI low.
• A bearish signal pairs a higher price high with a lower RSI high.
• The RSI uses a 13-period setting, with distinct pivot lookbacks for long and short signals.
• Daily RSI filters entries, while configurable stops and opposite divergences govern exits.
• Divergence may not lead to an immediate reversal, and no backtest performance results are reported.

Tags

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