Pro Divergence [regular + hidden] by TradingClue – Strategy by TradingClue – TradingView

For many years I have developed toolsets and strategies that use divergences, e.g. AutoDivergence and CCIDvergence. Pro Divergence is my latest development and benefits from those years of experiences. The main algorithm for detecting divergences has changed from using linear regressions and moving averages to algorithmic trendline detection like I used in TD Lines. This new approach supports the detection of regular divergences, but also hidden divergences can be identified. Before we get into the details of the mechanics of Pro Divergence, let’s summarize what divergences are all about when it comes to trading.

█ Frequent divergence

The basic idea is quite simple: If price goes in the opposite direction to another technical indicator – in most cases an oscillator – we speak of a divergence. A frequent divergence can be a signal for a trend reversal. That’s it. For example, if the price is currently rising, while Momentum is falling at the same time – it may be time for a reversal and the price of an asset is going to drop soon. If there are additional indications to confirm the signal, e.g. if RSI is in the overbought area, it may be a good idea to short that particular asset. Regular bullish divergences are indicated when price forms lower lows while an oscillator shows higher lows. Frequent bearish divergences are indicated when price forms higher highs while an oscillator shows lower highs.

█ Hidden divergence

While regular divergences indicate trend reversals, hidden divergences indicate trend continuation. When the price makes higher lows and the oscillator shows lower lows, we are talking about a bullish hidden divergence. When the price makes lower highs and the oscillator shows higher highs, this is a bearish hidden divergence. These rules for identifying divergences are quite simple and straightforward. And they are also sometimes confusing. But that’s what Pro Divergence helps you with: trade based on adaptive signals to identify all kinds of divergences. You can either use the toolkit strategy settings to optimize the properties to show winning backtest results. Or you use the signals as an extra confirmation of another type of signal/strategy you are working with.

█ Summary of all current features

• Oscillator: choose between CCI, Momentum, MACD or RSI. All oscillators settings are customizable. • RSI filter: in some cases the quality of the signals can be improved by an RSI filter, e.g. a bullish signal will only be valid if RSI is in the oversold area. Set the RSI period and the oversold/overbought levels to your preferred values. • You can display all divergences on the chart to get an idea of ​​the current price action. Or you can choose any combination of signals you want to include in a backtest. Possible signals are: regular bullish divergence, regular bearish divergence, hidden bullish divergence, hidden bearish divergence • Exit: there are many ways to get exit signals – combinations of the options below are possible: • fixed profit targets/stop losses based on ticks • Exit when momentum reversal • Exit when price touches the opposite Bollinger Band (eg a long position will be closed when price touches the upper Bollinger Band). The settings for the Bollinger Bands are customizable. • Entry: you can choose to enter a trade only if momentum goes in the same direction as the direction of your trade (eg only go long if momentum rises) • time and date file • Do a backtest only in a given time frame (perhaps you are not interested in the entire range of historical data when trading in a higher time frame. Or you would like to do some kind of step forward analysis) • Trade only during special times of a day, eg. trade only during the first hours of a trading session

Since this strategy makes heavy use of mathematics and technical indicators, it is not tied to a certain asset class or time frame. It has been successfully tested on a large number of financial instruments such as stocks, crypto, forex and others.