RSI Price Divergence for Long Entries with Trailing Stops

Summary

This strategy uses a 14-period RSI and price pivots to identify regular and hidden bullish divergences as long-entry signals. A price lower low with a higher RSI low marks regular bullish divergence; a higher price low with a lower RSI low marks hidden bullish divergence. The source also plots RSI averages, but their crossovers do not drive its entries. Positions may close when RSI reaches a specified level or a bearish divergence occurs, or through a percentage or ATR-based trailing stop.

The document discusses smoothing, false divergence signals, lag, and the possibility of large drawdowns. Its parameter list and published backtest settings describe a short BTC/USDT futures test, but no performance results are supplied. The prose describes additional RSI midpoint and EMA crossover signals that are not implemented as entry conditions in the source, and its bearish divergence rules are exit signals rather than short entries. Parameter tuning and added confirmations are proposed, not demonstrated.

Key ideas

• Regular bullish divergence compares a lower price low with a higher RSI low.
• Hidden bullish divergence compares a higher price low with a lower RSI low.
• The source opens long positions on bullish divergences and can close them on bearish divergence or RSI and trailing-stop conditions.
• Divergences can fail while the prevailing price trend continues.
• The published settings identify a BTC/USDT futures backtest, but give no performance evidence.

Tags

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