Trading Regular and Hidden RSI Divergences with Pivot Confirmation
Summary
This strategy identifies regular and hidden bullish or bearish divergences by comparing RSI pivots with price pivots. Regular bullish divergence occurs when price forms a lower low while RSI forms a higher low; regular bearish divergence pairs a higher price high with a lower RSI high. Hidden divergences use the opposite pivot relationships. The source implements regular bullish entries and exits them when RSI crosses above 50. It displays the other divergence types, but their corresponding entry and exit rules are commented out.
The document lists an RSI period of 14 and pivot lookback settings, plus BTC/USDT futures backtest dates, but reports no performance results. Pivot confirmation requires bars on both sides of a candidate pivot, which can delay signal recognition. The text also warns that hidden divergences may be misclassified and that performance depends on RSI settings. It recommends manual review and suggests additional indicators or machine learning as possible ways to filter signals.
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.
- Hidden divergences use different price and RSI pivot relationships and may be harder to classify reliably.
- The supplied source trades regular bullish divergence but only plots the other divergence types.
- Pivot lookbacks confirm signals after subsequent bars, 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.