Dynamically Displays Divergence on Live Charts
Sierra Chart Divergence Lines Indicator plots diagonal lines on the price graph indicating where positive and negative divergence are present. Divergence is measured using patterns in the price action. First the code locates swing high and swing low pivots. Adjustable input called ‘lookback bars’ is used to adjust the sensitivity. Once each swing high and low has been computed, the indicator compares the value at each swing high/low to the value of an underlying study. Both Standard and Hidden divergence are available.
- Indicator Type: Momentum
- Indicator Basis: Price momentum diverging from price action
- Time Frames: All supported time frames and aggregation periods
- Trade Setups:
- Trend reversals
- Taking profits
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For negative divergence, compares higher highs in price action to lower values in the underlying lower study. Likewise, positive divergence compares lower lows in price action with higher values in underlying lower study. The anticipated result of standard divergence is for a reversal in recent trends. There are no certainties any reversal will take place.
In an uptrend, compares higher lows in price action with lower values in underlying lower study. During downtrend, compares lower highs in price action with higher values in the underlying lower study. The anticipated result of hidden divergence is for a continuation of the recent trend. Trend continuations upon a hidden divergence signal are NOT guaranteed.
Each indicator uses two separate lower plots from which to measure divergence signals. One version uses two plots of the MACD indicator. Named Divergence MACDx2, these indicators report divergence signals using the MACD Value as well as the MACD Histogram. Likewise the other version named Divergence RSI & Stochastic, uses two lower plots independently. It will report divergence signals based on the RSI plot. And it will also report divergence signals measured from the FullK plot of the Stochastic indicator. When divergence is computed in both lower plots, the indicator reports this as double divergence.
Please be sure to view the demo video before placing your order. The demo video constitutes the entire instruction manual for installing, and setting up the indicator on your platform.
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Watch the video, Sierra Chart Divergence Lines Indicator below:
Technical description of how the code works:
The code is designed to locate swing pivots in price. This is the first step. The swing pivots are defined using a default lookback period of 3. Increasing the lookback period causes the code to locate larger structures (macro as opposed to micro). The swing pivots are set by default to compare highs and lows. This can be adjusted to compare the close of each candle instead of the high/low. When plotted, each swing pivot is marked with a blue square.
For each swing pivot, the code compares the value of the lower study at the current swing pivot to the value of the lower study at the previous swing pivot. Lower swing pivot with a higher price momentum will generate a positive divergence signal. Higher swing pivot with a lower price momentum will generate a negative divergence. The default is to compare (on the price chart) low to low and high to high, in order to determine if swing pivots are higher or lower. This behavior can be adjusted so that the comparison is made from close to close.
Before requesting to purchase any of these indicators it is very important that you watch the demo video, otherwise you will not have the knowledge needed to adjust the indicator settings to get the behavior you seek.
DISCLAIMER: I AM NOT A CERTIFIED FINANCIAL ADVISOR AND NOTHING IN THIS VIDEO OR TEXT IS AN ADVERTISEMENT OR RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT. NOR IS THIS VIDEO OR TEXT INTENDED TO INSTRUCT YOU ON HOW TO MAKE BUY OR SELL DECISIONS USING ANY OF THESE INDICATORS.