#Hint: RSI Divergence Scan Developed by Signet. 01/23/2019. \n\n The relative strength index (RSI) is a momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. The indicator was originally developed by J. Welles Wilder and introduced in his seminal 1978 book, "New Concepts in Technical Trading Systems." \n\n Traditional interpretation and usage of the RSI is that values of 70 or above indicate that a security is becoming overbought or overvalued and may be primed for a trend reversal or corrective pullback in price. An RSI reading of 30 or below indicates an oversold or undervalued condition. The standard is to use 14 periods to calculate the initial RSI value. In a strong upward trending environment, the RSI rarely falls below 40, and will most always stick to the 50 – 80 range. When the RSI crosses the centreline it is a stronger signal that a trend change has happened than a simple extreme reading above or below the 70-30 lines. When the indicator crosses the centreline to the upside, it means that the average gains are exceeding the average losses over the period. The opposite is true for a downside cross.When a centreline cross happens, it can be a good time to think about trade entry on a fresh pullback in price.\n\n This is how the RSI is calculated: \n Pick the base number of periods on which to base the study. \n compare todays closing price with yesterdays. \n add all the upward movements in points between closing prices. \n add all the downwards movements between closing prices. \n calculate the EMA ( exponential moving average ) of the upward and downward price movements. \n calculate the relative strength: \n <b>[ RS = EMA Upward Price Movements / EMA Downward Price Move ments ]</b> \n Calculate the Relative Strength Index (RSI): \n <b> RSI = 1 / ( 1 + RS ) </b> \n\n There are a few indicators that pair well with the RSI and using them together can proved better trading signals. \n RSI, candlestick strategy, \n RSI, MACD strategy, \n RSI, MA Cross strategy, & \n RSI, Bollinger band strategy,
#Trade Lessons:
#Wait for conformation before considering a trade,
#The RSI can remain at extreme levels for long periods in a strong trend
#Dont jump right in when you see a reading of 90, first allow the RSI line to fall back below the overbought line to at least give a stoploss level to trade off .
#Watch the Centreline for trend confirmtion.
#If the RSI line reaches an extreme and then returns to the centreline it is a better indication of a turning point in the trend. Waiting for this to occur can cut out those nasty impulsive trades!
#It is common for technical traders to watch the centreline to show shifts in trend,
#If the RSI is above 50, then it is considered a bullish uptrend, and if its below 50, then a bearish downtrend is in play.
# RSI Failure Swing Trade:
#A ‘bearish failure swing’ happens when the RSI enters the overbought zone at 70 and then comes back down below the 70 mark again.
#In this case, a short position will be entered only after the RSI cuts down through the 70 line from the top.
#The ‘bullish failure swing’ occurs when the RSI enters the oversold zone at 30 and then rallies out again and rises above the 30 line again.
#The trader uses this rise above the 30 line as a trigger to go long.
declare lower;
#Hint showDivergentRSI: YES will plot a Divergent Signal on the RSI line, NO will remove the Divergent Signal from the RSI Line
#Hint showDivergentSignals: YES will plot a Divergent Signal on the OS / OB line, NO will remove the Divergent Signal from the OS / OB Line
#Hint showBreakoutSignals: Actual indication of RSI crossovers with the overbought/oversold levels can be enabled by setting the show breakout signals parameter value to YES.
#Hint averageType: By default, the Wilder's moving average is used in the calculation of RSI, however, you are free to select a different type of average.
#Hint over_Sold: On a scale from 0 to 100, default values of 30 are typically use for the oversold level
#Hint over_Bought: On a scale from 0 to 100, default values of 70 are typically use for the overbought level
#Hint Length: The standard is to use 14 periods to calculate the initial RSI value but I like using 10 Periods.
#Hint Sound_AudibleAlert_for_RSI_Cross : This turns off the audio alerts for the RSI Crossovers
# input parameters
input length = 10;
input over_Bought = 70;
input over_Sold = 30;
input price = close;
input averageType = AverageType.WILDERS;
input showDivergentRSI = yes;
input showBreakoutSignals = no;
input showDivergentSignals = yes;
input Sound_AudibleAlert_for_RSI_Cross = No;
def NetChgAvg = MovingAverage(averageType, price - price[1], length);
def TotChgAvg = MovingAverage(averageType, AbsValue(price - price[1]), length);
def ChgRatio = if TotChgAvg != 0 then NetChgAvg / TotChgAvg else 0;
plot RSI = 50 * (ChgRatio + 1);
RSI .SetLineWeight(2);
plot OverSold = over_Sold;
plot OverBought = over_Bought;
plot RSI_CrossUp = if RSI crosses above OverSold then OverSold else Double.NaN;
plot RSI_CrossDn = if RSI crosses below OverBought then OverBought else Double.NaN;
RSI_CrossUp .SetHiding(!showBreakoutSignals);
RSI_CrossDn .SetHiding(!showBreakoutSignals);
RSI.DefineColor("OverBought", GetColor(5));
RSI.DefineColor("Normal", GetColor(7));
RSI.DefineColor("OverSold", GetColor(5));
RSI.AssignValueColor(if RSI > over_Bought then RSI.Color("OverBought") else if RSI < over_Sold then RSI.Color("OverSold") else RSI.Color("Normal"));
OverSold.SetDefaultColor(GetColor(8));
OverBought.SetDefaultColor(GetColor(8));
RSI_CrossUp .SetDefaultColor(Color.UPTICK);
RSI_CrossUp .SetPaintingStrategy(PaintingStrategy.ARROW_UP);
RSI_CrossDn .SetDefaultColor(Color.DOWNTICK);
RSI_CrossDn .SetPaintingStrategy(PaintingStrategy.ARROW_DOWN);
def n = Double.NaN;
def Hclose = high;
def lclose = low;
def prSlope = (Hclose + lclose) / 2;
# Define the Volume Study
def volavg = Average(volume, length);
#Define Volume Slope for Divergence Measurement
def hvol = Highest(volume, length);
def lvol = Lowest(volume, length);
def volslope = (hvol + lvol) / 2;
# Define the Divergence
def isbulld = if (lvol < 0 and volavg >= 0) then 1 else 0;
def isbeard = if (hvol > 0 and volavg <= 0) then 1 else 0;
def myslope = reference LinearRegressionSlope(RSI, length);
def bullslope = reference LinearRegressionSlope(low, length);
def bearslope = reference LinearRegressionSlope(high, length);
def priceslope = (bullslope + bearslope) / 2;
plot Divergence = if (bullslope < 0 and myslope >= 0) or (bearslope > 0 and myslope <= 0) then RSI else n;
Divergence .DefineColor("Bullish_Divergence", GetColor(6));
Divergence .DefineColor("Bearish_Divergence", GetColor(5));
Divergence .AssignValueColor(if (bullslope < 0 and myslope >= 0) then Divergence .Color("Bullish_Divergence") else if (bearslope > 0 and myslope <= 0) then Divergence .Color("Bearish_Divergence") else Color.GRAY);
Divergence .SetHiding(!showDivergentRSI);
Divergence .SetPaintingStrategy(PaintingStrategy.POINTS);
Divergence .SetLineWeight(5);
plot BullSignal = if (bullslope < 0 and myslope >= 0) then OverBought else Double.NaN;
plot BearSignal = if (bearslope > 0 and myslope <= 0) then OverSold else Double.NaN;
PLOT "0" = 50;
"0" .SetDefaultColor(GetColor(8));
"0" .hidebubble();
"0" .hidetitle();
plot "50" = 50;
"50" .SetDefaultColor(GetColor(8));
"50" .hidebubble();
"50" .hidetitle();
PLOT "100" = 50;
"100" .SetDefaultColor(GetColor(8));
"100" .hidebubble();
"100" .hidetitle();
#Positive divergence happens when the price of an asset is drifting lower yet the RSI is starting to trend higher.
#This could mean that the price is nearing a bottom and will probably turn up soon.
#Negative divergence happens the opposite way, the price is driving higher, but the RSI has stalled and is beginning to turn lower.
#When this occurs it is likely that the price will stop rising soon after. And then follow the RSI lower.
DefineGlobalColor("Bull_Label_Color", CreateColor(148, 214, 232));
DefineGlobalColor("Bear_Label_Color", CreateColor(255, 127, 0));
AddLabel (BullSignal, "Bullish Divergence", GlobalColor("Bull_Label_Color" ) );
AddLabel (BearSignal, "Bearish Divergence", GlobalColor("Bear_Label_Color" ) );
input Show_RSIcross_Labels = yes;
AddLabel (Show_RSIcross_Labels, if
RSI_CrossUp then "RSI OverSold" else if
RSI_CrossDn then "RSI OverBought" else "", if
RSI_CrossUp then
Divergence .Color("Bullish_Divergence") else
Divergence .Color("Bearish_Divergence"));
BullSignal .SetHiding(!showDivergentSignals);
BearSignal .SetHiding(!showDivergentSignals);
BullSignal .SetDefaultColor(Color.UPTICK);
BullSignal .SetPaintingStrategy(PaintingStrategy.TRIANGLES);
BearSignal .SetDefaultColor(Color.DOWNTICK);
BearSignal .SetPaintingStrategy(PaintingStrategy.TRIANGLES);
def MidlineCross = (RSI crosses above 50) or (RSI crosses below 50);
def ExtremeCross = (RSI crosses 70 ) or (RSI crosses below 30);
def Midline_signal = MidlineCross is true;
def Extreme_signal = ExtremeCross is true;
def TrendChange = if Sound_AudibleAlert_for_RSI_Cross == yes then rsi crosses 50 or rsi else no;
Alert(TrendChange, "RSI Trend Change", Alert.BAR, Sound.Ring);
def Extreme = if Sound_AudibleAlert_for_RSI_Cross == yes then rsi crosses 70 or rsi crosses 30 else no;
Alert(Extreme, "RSI @ Extreme", Alert.BAR, Sound.Ring);
