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DrNon RSI Divergence

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RSI Divergence Strategy (Long Entry + RSI Filter)

Concept:
This strategy combines classic RSI bullish divergence with a low RSI entry filter to catch early trend reversals in oversold zones.
It aims to identify high-probability turning points where price forms a lower low while RSI makes a higher low, indicating weakening downside momentum.

Entry Logic
• Bullish Divergence detected between price and RSI
→ Price makes a Lower Low, RSI makes a Higher Low
• RSI < Threshold (default = 25) ensures entry only in deeply oversold conditions
• Enters Long when both conditions are true and no existing position is open.

Exit Logic
1. RSI Drop Exit:
If RSI continues to fall for a specified number of consecutive bars (dropPeriod, default = 3), the strategy closes the position.
2. Stop-Loss Exit:
Automatically closes when the open trade loses more than the specified percentage (stopLossPct, default = 15%).

Parameters

Parameter Default Description
RSI Period 14 Standard RSI length
RSI Entry Threshold 25 Open long only when RSI < this value
Pivot Lookback Left / Right 5 / 5 Determines swing points for divergence
Drop Period 3 Bars of continuous RSI decline before closing
Stop Loss % 15% Maximum allowed loss before exit

Use Case
• Works best in swing trading or reversal-catching environments.
• Combine with support/resistance or volume analysis for higher precision.
• Ideal for assets with mean-reversion tendencies (e.g. indices, large-cap stocks, crypto majors).

Visualization
• 🟢 Triangle Up: Bullish Divergence Detected
• 🟢 Dot / Marker: Entry signal (when RSI < threshold)
• ✖ Marker: Exit by RSI drop or Stop-loss

Strategy Notes
• Default setup trades only Long side.
• Can be extended easily to include Bearish Divergence Short entries (RSI > 75).
• Backtest on multiple timeframes (1H, 4H, 1D) for parameter optimization.

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