RSI Price Divergence Signals for Potential Trend Reversals

Summary

This strategy looks for potential reversals by comparing recent price extremes with RSI extremes. It uses a 14-period RSI and a configurable lookback to identify a bullish signal when price makes a new low while RSI remains above its own recent low and below the oversold threshold. A bearish signal occurs when price makes a new high while RSI remains below its recent high and above the overbought threshold. The supplied defaults include a 10-period lookback and thresholds of 30 and 70; signals are displayed visually and also initiate long or short strategy entries.

The document gives a rule description, adjustable inputs, and example backtest settings for ETH/USDT futures on daily bars over roughly one year, but it reports no resulting returns or other performance measures. Its code uses rolling extrema rather than a more elaborate confirmed swing-point method, and it does not specify explicit stop-loss or take-profit rules. The text cautions that divergences can fail, especially during strong trends, and that parameter choices, fees, and slippage may affect outcomes.

Key ideas

• Bullish divergence is signaled when price reaches a new lookback low but RSI does not reach its own low.
• Bearish divergence compares a new price high with an RSI high that is not renewed.
• The signal rules combine divergence with oversold or overbought RSI thresholds.
• Example settings use daily ETH/USDT futures data, but no backtest performance is reported.
• The strategy does not define explicit protective stops or profit targets.

Tags

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