Divergence Settings
In this page, you will learn the meaning of all the settings in the ‘RSI/Oscillator and Divergence Settings’ section in the settings.
Towards the top of the indicator’s settings, there is a section labeled ‘RSI/Oscillator and Divergence Settings’. In this page, we will be going through all the settings in that section.
But first, we need to define some terms.
What is RSI?
The RSI is an indicator that stands for ‘Relative Strength Index’.
What are Divergences?
A divergence occurs when price moves in the opposite direction of the oscillator (RSI, in this case). In other words, a chart might display a change in momentum before a corresponding change in price.
When you subscribe to the StratBuilder, you also get the ‘Algo Divergences’ indicator, which can visually display all 4 types of divergences. The StratBuilder is using the same divergences that are displayed in the ‘Algo Divergences’ indicator.
The 4 types of divergences are:
Regular Bullish Divergence - Lower low on price action and higher low on oscillator
Regular Bearish Divergence - Higher high on price action and lower high on oscillator
Hidden Bullish Divergence - Higher low on price action and lower low on oscillator
Hidden Bearish Divergence - Lower high on price action and higher high on oscillator
The Settings
Quick note: Every setting here is also available on the ‘Algo Divergences’ indicator so you can see visually where the divergences will be with different settings.
‘Use External Oscillator For Divergences (not RSI)’ and ‘External Oscillator:’
This setting is false by default. The default oscillator for divergences is the RSI. If you would like to use a different oscillator, you can turn this on by clicking the checkbox, and then selecting your preferred oscillator in the dropdown below it labeled ‘External Oscillator’ (oscillator must be on your chart to select it).
Note: The ‘External Oscillator:’ dropdown input will only matter if the ‘Use External Oscillator For Divergences (not RSI)’ setting is checked on.
‘Divergence Bars Lookback’
The maximum amount of bars a pivot high/low can be from the other pivot high/low that it is drawing divergence from.
For example, if your ‘Divergence Bars Lookback’ is 22, and there is regular bullish divergence between two pivot highs but they are 23 bars apart, then that divergence will not count.
‘RSI Data Source’ and ‘RSI Length’
The default for ‘RSI Data Source’ is ‘close’. This means that the RSI is calculating its values based on the closing price of the current chart.
The default for ‘RSI Length’ is 14, this is the number of bars the RSI can look back into the chart to make its calculation.
Entry/Exit Conditions