Trading Regular and Hidden RSI Divergences Against Price Pivots

Summary

This strategy compares RSI pivot highs and lows with corresponding price pivots to identify regular and hidden divergences. Regular bullish divergence occurs when RSI forms a higher low while price makes a lower low; hidden bullish divergence pairs a lower RSI low with a higher price low. The bearish cases invert the relationships. The source uses an RSI period of 20, left and right pivot lookbacks of 5 bars, and a permitted prior-pivot range of 5 to 60 bars. It enters long on either bullish condition and short on either bearish condition.

The example uses 15-minute BTC/USDT futures data with a 5-minute base period over about one week, but gives no performance results. Pivot confirmation requires bars to the right of the pivot, so signals are identified with delay; plotting them back at the pivot can visually obscure that timing. The code includes entries but no active exit or stop-loss rules. Divergences can occur during ordinary consolidation, and the document notes noise, especially in hidden signals. It recommends confirmation and risk controls but does not evaluate them.

Key ideas

• Regular bullish divergence pairs a lower price low with a higher RSI low, while hidden bullish divergence pairs a higher price low with a lower RSI low.
• Regular bearish divergence pairs a higher price high with a lower RSI high, while hidden bearish divergence pairs a lower price high with a higher RSI high.
• The source enters long or short when the corresponding pivot divergence is confirmed.
• Pivot lookback to the right delays confirmation, even when plots are drawn back at the pivot.
• The source has no active exit or stop-loss rules, and the published backtest settings include no performance results.

Tags

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