Trading Regular and Hidden RSI Divergences with Pivot Confirmation

Summary

This strategy looks for disagreement between price pivots and RSI pivots. A regular bullish divergence pairs a lower price low with a higher RSI low, while a regular bearish divergence pairs a higher price high with a lower RSI high. The described entry confirmation is an RSI move across the midpoint: above it for a bullish setup and below it for a bearish setup. Hidden bullish and bearish divergences are also identified, though the source code plots those patterns without enabling their entry orders.

The implementation uses a 14-period RSI by default, pivot lookbacks of five bars on each side, and a configurable range for comparing pivots. Its backtest configuration covers BTC/USDT futures over a one-week period, but no performance statistics are provided. Pivot confirmation requires bars to form on the right side of a candidate pivot, so signals are delayed; the document also cautions that divergences can be misleading and midpoint breaks may be unreliable. It recommends testing parameter choices, confirmation filters, and trade risk controls.

Key ideas

• Regular bullish divergence pairs a lower price low with a higher RSI low.
• Regular bearish divergence pairs a higher price high with a lower RSI high.
• The described regular divergence trades use a crossing of the RSI midpoint as confirmation.
• Hidden divergence patterns are plotted in the source, but their trade orders are commented out.
• The short backtest setup has no reported performance results, and pivot confirmation can delay signals.

Tags

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