High-Low Divergence

How It Works

High-Low Divergence is a technical analysis tool that identifies swing points and RSI divergences to help traders spot potential reversals without cluttering the chart interface.

Swing Point Detection

The indicator employs a classic pivot-point algorithm with a configurable lookback window to identify structural turning points. For each bar, it verifies whether the high or low represents the highest or lowest value within N bars on both sides. When confirmed, colored dots appear above swing highs (default: lime green) or below swing lows (default: red).

RSI Divergence Detection

When new swing points form, the tool compares them to previous swings of the same type:

Bearish Divergence: Price creates a higher high, but RSI momentum weakens at that swing high, signaling potential downside reversal (red down-triangle displayed).
Bullish Divergence: Price prints a lower low, but RSI strengthens at that swing low, suggesting potential upside reversal (green up-triangle displayed).

Usage Applications

Spotting Reversals Early: Triangles indicate diverging price structure and RSI momentum — a reliable early reversal signal.
Mapping Market Structure: Dots provide visual swing maps showing trend identification.
Combining with Other Tools: Pairs effectively with support/resistance zones and supply/demand areas.
Style Customization: Scalpers use lookback 2-4, day traders use 5-8, swing traders use 10-20.

Key Advantages

All-on-chart display eliminating separate panel requirements.
Smart RSI sampling using windowed approach rather than single-bar readings.
Lightweight with configurable Max History Bars parameter.
Fully customizable colors, offsets, RSI period, and sensitivity settings.

Last Updated: 01/12/2024

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