Divergence Scanner

RSI is the most popular and easiest to read due to its bounded range (0-100). MACD is also excellent, especially the histogram. Start with RSI, then add MACD for confirmation. Multiple indicators showing same divergence is most reliable.

Divergence can persist for weeks or months. That's why confirmation is essential. Don't enter on divergence alone - wait for a confirmation trigger (trendline break, pattern, etc.). Once confirmed, the move typically unfolds within days to weeks.

Yes, divergence fails regularly, especially in strong trends. That's why we use stops. Even with confirmation, expect 35-45% failure rate. Manage risk appropriately. Divergence improves odds but doesn't guarantee reversal.

Daily charts provide the best balance of reliability and opportunity. Weekly divergences are very significant but less common. 4H is good for active traders. Lower timeframes (1H, 15m) have more noise and false signals.

Regular divergence predicts reversals (counter-trend). Hidden divergence predicts continuations (with-trend). Regular: price new high/low, indicator doesn't confirm. Hidden: price higher low or lower high, but indicator makes opposite swing. Hidden trades WITH the trend.

Run divergence analysis on multiple indicators (RSI, MACD, OBV). When 2+ indicators show the same divergence, it's more reliable. Count confirming indicators as part of your quality score. Multiple indicator divergence significantly increases success probability.

Score based on: timeframe (daily=3, 4H=2, 1H=1), indicator extreme (+2 if overbought/oversold), location (+2 at S/R), multi-indicator (+1 per extra indicator). Trade divergences scoring 5+ out of possible 8-9 points.

Depends on your style. Trendline break is objective and popular. Candlestick pattern (engulfing, hammer) gives visual confirmation. RSI crossing back above 30 (bullish) or below 70 (bearish) is indicator-based confirmation. Multiple confirmations increase probability.

Hidden divergence trades WITH the trend. In uptrend pullback, look for hidden bullish (price higher low, indicator lower low). Enter when pullback shows signs of ending. Stop below recent swing low. Target: new trend high. Higher probability than counter-trend trading.

No signal is 100%. Strong trends can power through divergence. External factors (news, broader market) can override. Sometimes it's just probability - 65% success means 35% failure. This is why position sizing and stops are essential.

Steps: 1) Calculate indicators (RSI, MACD, etc.), 2) Detect swings in price (fractal/pivot method), 3) Detect swings in indicator, 4) Match corresponding swings by time proximity, 5) Compare directions for divergence, 6) Validate (minimum bars, significance), 7) Score quality.

Key features: divergence_angle (slope difference), indicator_extreme (distance from 30/70), swing_count, bars_between_swings, trend_strength (ADX), distance_to_sr, multi_indicator_count, volume_confirmation. Train classifier on historical labeled divergences.

Methods: 1) Time-based: indicator swing must be within N bars of price swing, 2) Nearest: match each price swing to nearest indicator swing, 3) Percentage: indicator swing within X% of price swing time. Allow some flexibility - perfect alignment is rare.

Base divergence without confirmation: ~45-50% win rate. With confirmation: ~55-65%. Quality filtered (extreme, at S/R, multi-indicator): ~65-70%. Triple divergence confirmed: ~70%+. Edge = (win% × avg_win) - (loss% × avg_loss). Properly filtered divergence has positive expectancy.

Divergence as filter: use divergence to time entries in broader trend system. Divergence as signal: standalone divergence trades with confirmation. Combined: divergence at key levels (S/R, pattern breakout) as high-conviction trades. Track performance by integration method.