RSI Divergence Indicator

The RSI Divergence Indicator is designed to automatically detect and highlight divergences between price action and the Relative Strength Index (RSI). Divergences often signal potential trend reversals and provide valuable entry and exit points for traders.

What is RSI Divergence?

Divergence occurs when the price movement doesn’t match the indicator movement. There are two types of divergences:

Bullish Divergence

A bullish divergence forms when price makes a lower low, but the RSI makes a higher low. This indicates weakening downward momentum and a potential reversal to the upside.

Bearish Divergence

A bearish divergence forms when price makes a higher high, but the RSI makes a lower high. This indicates weakening upward momentum and a potential reversal to the downside.

Key Features

• Automatic detection of both bullish and bearish divergences
• Visual alerts on the chart with clear color coding
• Customizable RSI period and overbought/oversold levels
• Optional email and push notifications
• Compatible with both MT4 and MT5 platforms

How to Use the Indicator

1. Install the indicator on your MT4/MT5 platform
2. Adjust the settings according to your trading preferences
3. Look for divergence signals on your chart
4. Confirm signals with other technical analysis tools
5. Enter trades in the direction of the potential reversal

Installation Instructions

1. Download the indicator file
2. Copy the file to your MetaTrader indicators folder
3. Restart MetaTrader
4. Drag and drop the indicator onto your chart

Parameter Settings

• RSI Period: Default is 14, adjust based on your timeframe
• Overbought Level: Default is 70
• Oversold Level: Default is 30
• Divergence Lookback Bars: How far back to scan for divergences
• Alert Options: Enable/disable various alert types

Trading Strategy Example

A simple trading strategy using the RSI Divergence Indicator:

1. Wait for a bullish divergence to form in an oversold condition
2. Enter a long position when price confirms the reversal (e.g., breaks above a resistance level)
3. Set stop loss below the recent swing low
4. Take profit at previous resistance levels or use a trailing stop

Always use proper risk management and combine this indicator with other forms of analysis for best results.