Trading RSI Divergence with Pivot Confirmation and a Long-Term Filter

Summary

This strategy uses short-term RSI pivot divergences to identify possible reversals, with a longer-term RSI condition to filter entries. Regular bullish divergence occurs when price makes a lower low while RSI makes a higher low; hidden bullish divergence pairs a higher price low with a lower RSI low. The strategy looks for corresponding bearish patterns as well, though its coded exits rely mainly on long-term RSI thresholds and staged profit-taking.

The described setup uses a short RSI period of 5 and a long period of 50, with pivots identified using left and right lookbacks. Long entries require the long RSI to be at least 50 alongside a bullish divergence, or can add to an existing position when short RSI crosses above 20. Exits include partial closes at specified long-RSI levels and a full close below 30; an optional stop applies an 8% price rule. Published backtest settings cover BTC/USDT futures over a brief period, but no performance results are supplied. Divergences can fail, and pyramiding increases exposure. The written description and code are not fully aligned: bearish divergences are detected and plotted, but no short-entry rule is shown.

Key ideas

• Regular bullish divergence pairs a lower price low with a higher RSI low.
• Hidden bullish divergence pairs a higher price low with a lower RSI low.
• Long-term RSI filters bullish entries and supplies thresholds for staged exits.
• Pyramiding may increase exposure, while RSI divergence can generate false signals.
• The provided code shows bearish patterns but does not use them to open short positions.

Tags

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