This strategy judges the bullish and bearish trends of the market and makes trading decisions by calculating the divergence of RSI indicator. Specifically, it will judge hidden bullish signals when RSI forms lower lows but prices form higher lows. And it will judge hidden bearish signals when RSI forms higher highs but prices form lower highs. Then it determines the potential bullish or bearish trends of the market based on these signals and makes trades.
The strategy is mainly based on the bullish and bearish divergence theory of RSI indicator. When RSI and price form reverse divergences, it indicates potential reversals of the market. There are four specific situations:
Regular Bullish Signal: RSI forms higher low while price forms lower low. It indicates the buying power pushes up the RSI but not fully reflects on the price, implying strengthened bullish power.
Hidden Bullish Signal: RSI forms lower low while price forms higher low. It implies the selling power pushes down the RSI but not the price, indicating strengthened bullish power.
Regular Bearish Signal: RSI forms lower high while price forms higher high. It implies the selling power pushes up the price but not RSI, indicating strengthened bearish power.
Hidden Bearish Signal: RSI forms higher high while price forms lower high. It indicates buying power pushes up RSI but not price, implying strengthened bearish power.
Based on the above divergences, it judges the potential bullish or bearish trends of the market and the strengthening of buying/selling power to formulate trading strategies.
The strategy mainly leverages the bullish and bearish divergences of RSI to determine the potential bullish or bearish trends of market by capturing the relative strength changes between buying and selling power behind the price actions. It has certain predictive capabilities of reversals. But it also has risks of noisy signals. Ways like parameter optimization, indicator combination, machine learning can help further enhance the stability and profitability of the strategy.
/*backtest start: 2024-01-07 00:00:00 end: 2024-01-14 00:00:00 period: 15m basePeriod: 5m exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}] */ //@version=5 strategy(title="Divergence Indicator") len = input.int(title="RSI Period", minval=1, defval=20) src = input(title="RSI Source", defval=close) lbR = input(title="Pivot Lookback Right", defval=5) lbL = input(title="Pivot Lookback Left", defval=5) rangeUpper = input(title="Max of Lookback Range", defval=60) rangeLower = input(title="Min of Lookback Range", defval=5) plotBull = input(title="Plot Bullish", defval=true) plotHiddenBull = input(title="Plot Hidden Bullish", defval=true) plotBear = input(title="Plot Bearish", defval=true) plotHiddenBear = input(title="Plot Hidden Bearish", defval=true) bearColor = color.red bullColor = color.green hiddenBullColor = color.new(color.green, 80) hiddenBearColor = color.new(color.red, 80) textColor = color.white noneColor = color.new(color.white, 100) osc = ta.rsi(src, len) plot(osc, title="RSI", linewidth=2, color=#2962FF) hline(50, title="Middle Line", color=#787B86, linestyle=hline.style_dotted) obLevel = hline(70, title="Overbought", color=#787B86, linestyle=hline.style_dotted) osLevel = hline(30, title="Oversold", color=#787B86, linestyle=hline.style_dotted) fill(obLevel, osLevel, title="Background", color=color.rgb(33, 150, 243, 90)) plFound = na(ta.pivotlow(osc, lbL, lbR)) ? false : true phFound = na(ta.pivothigh(osc, lbL, lbR)) ? false : true _inRange(cond) => bars = ta.barssince(cond == true) rangeLower <= bars and bars <= rangeUpper //------------------------------------------------------------------------------ // Regular Bullish // Osc: Higher Low oscHL = osc[lbR] > ta.valuewhen(plFound, osc[lbR], 1) and _inRange(plFound[1]) // Price: Lower Low priceLL = low[lbR] < ta.valuewhen(plFound, low[lbR], 1) // bull : 상승 Condition : 조건 bullCond = plotBull and priceLL and oscHL and plFound // 상승다이버전스? strategy.entry("상승 다이버전스 진입", strategy.long, when = bullCond) // strategy.close("상승 다이버전스 진입", when = ta.crossover(osc, 70)) plot( plFound ? osc[lbR] : na, offset=-lbR, title="Regular Bullish", linewidth=2, color=(bullCond ? bullColor : noneColor) ) plotshape( bullCond ? osc[lbR] : na, offset=-lbR, title="Regular Bullish Label", text=" Bull ", style=shape.labelup, location=location.absolute, color=bullColor, textcolor=textColor ) //------------------------------------------------------------------------------ // Hidden Bullish // Osc: Lower Low oscLL = osc[lbR] < ta.valuewhen(plFound, osc[lbR], 1) and _inRange(plFound[1]) // Price: Higher Low priceHL = low[lbR] > ta.valuewhen(plFound, low[lbR], 1) hiddenBullCond = plotHiddenBull and priceHL and oscLL and plFound strategy.entry("히든 상승 다이버전스 진입", strategy.long, when = hiddenBullCond) // strategy.close("히든 상승 다이버전스 진입", when = ta.crossover(osc, 70)) plot( plFound ? osc[lbR] : na, offset=-lbR, title="Hidden Bullish", linewidth=2, color=(hiddenBullCond ? hiddenBullColor : noneColor) ) plotshape( hiddenBullCond ? osc[lbR] : na, offset=-lbR, title="Hidden Bullish Label", text=" H Bull ", style=shape.labelup, location=location.absolute, color=bullColor, textcolor=textColor ) //------------------------------------------------------------------------------ // Regular Bearish // Osc: Lower High oscLH = osc[lbR] < ta.valuewhen(phFound, osc[lbR], 1) and _inRange(phFound[1]) // Price: Higher High priceHH = high[lbR] > ta.valuewhen(phFound, high[lbR], 1) // bear : 하락 bearCond = plotBear and priceHH and oscLH and phFound strategy.entry("하락 다이버전스 진입", strategy.short, when = bearCond) // strategy.close("하락 다이버전스 진입", when = ta.crossunder(osc, 50)) plot( phFound ? osc[lbR] : na, offset=-lbR, title="Regular Bearish", linewidth=2, color=(bearCond ? bearColor : noneColor) ) plotshape( bearCond ? osc[lbR] : na, offset=-lbR, title="Regular Bearish Label", text=" Bear ", style=shape.labeldown, location=location.absolute, color=bearColor, textcolor=textColor ) //------------------------------------------------------------------------------ // Hidden Bearish // Osc: Higher High oscHH = osc[lbR] > ta.valuewhen(phFound, osc[lbR], 1) and _inRange(phFound[1]) // Price: Lower High priceLH = high[lbR] < ta.valuewhen(phFound, high[lbR], 1) hiddenBearCond = plotHiddenBear and priceLH and oscHH and phFound strategy.entry("히든 하락 다이버전스 진입", strategy.short, when = hiddenBearCond) // strategy.close("히든 하락 다이버전스 진입", when = ta.crossunder(osc, 50)) plot( phFound ? osc[lbR] : na, offset=-lbR, title="Hidden Bearish", linewidth=2, color=(hiddenBearCond ? hiddenBearColor : noneColor) ) plotshape( hiddenBearCond ? osc[lbR] : na, offset=-lbR, title="Hidden Bearish Label", text=" H Bear ", style=shape.labeldown, location=location.absolute, color=bearColor, textcolor=textColor )template: strategy.tpl:40:21: executing "strategy.tpl" at <.api.GetStrategyListByName>: wrong number of args for GetStrategyListByName: want 7 got 6