Overview

A useful article from Investopedia defining divergence and what the indicator tells you

The study works by detecting divergence between swings on the chart and swings on an oscillator. Swings in this context are synonymous to peaks or pivots.

The image to the right highlights different types of swings

A few definitions:

The 1st peak refers to the swing that is on the left hand side of the chart.
The 2nd peak refers to the swing that is on the right.
A divergence is when the peaks of the price go in a different direction from the oscillator. Price increasing Vs. oscillator decreasing, or vice versa.
A bearish divergence (shown in red) looks for a series of diverging "swing high"s.
A bullish divergence (shown in green) looks for a series of diverging "swing low"s.

A line is drawn between the two swings once a divergence is confirmed.

Sensitivity Settings

Swings are defined as bars that peak higher/lower than all their neighbors. The more bars beside the peak that make a lower high/higher low, the more significant the swing.

The Swing Sensitivity input dictates how many bars need to make a lower high/higher low than the peak for it to be considered for divergence. An example with Swing Sensitivity = 3 is shown in blue on the image to the right.

Sensitivity also has an impact on the responsiveness of the study. A lower sensitivity value means that swings will be detected faster, as there needs to be less bars on the right of the 2nd peak until a swing is registered. The colored arrow indicated on what bar a divergence was detected.

Early Detection

The Trigger Sensitivity input controls the 2nd peak's right side sensitivity and by extension how quickly a peak is detected. Lower values means sooner detection of divergence, but more false positives on short swings.

Divergence Lookback

Divergence is detected between two swings. The study is limited in how many peaks it can look back through for divergence through the Divergence Lookback Number of Peaks input. If there are multiple peaks that divert in the lookback it selects one according to the Divergence Lookback Use Nearest/Furthest Peak input.

Filters

Bars/Oscillator Crossing Divergence Line

The study can filter out bars or oscillator values that cross the divergence line. Examples are shown in images to the right.

Inputs

Input name	Description

Input name	Description
Bullish Divergence Price Reference	Reference to the input data for detecting Swing Lows
Bearish Divergence Price Reference	Reference to the input data for detecting Swing Highs
Oscillator Reference	Reference to the subgraph we want to detect divergence with
Draw Divergence Lines	Select whether to draw the actual divergence lines on the main price panel and/or the oscillator region
Oscillator Graph Region	The graph region of the oscillator
Swing Sensitivity	Number of bars sensitivity for detecting swings (see Sensitivity Settings)
Trigger Sensitivity	Number of bars sensitivity on the right side of the 2nd peak (see Early Detection)
On Bar close	Should the divergence be detected on bar close or intrabar
Divergence Signal Visual Offset (in Ticks)	Visual offset in ticks from the bar of the arrow marking divergence detection
Divergence Types to Detect	Select whether Regular and/or Hidden Divergence types are detected
Oscillator Pivot Alignment Enabled	When enabled and a price swing is detected, the study will look back for a swing in the oscillator to use for divergence detection. If no swing is found then the study will not look for divergence.
Oscillator Pivot Alignment Lookback	Amount of bars to look back in the oscillator for a swing.
Bullish Divergence Line Color	Color for lines drawn for Bullish Divergence
Bearish Divergence Line Color	Color for lines drawn for Bearish Divergence
Divergence Line Width	Width of lines drawn for Divergence
Filter For Price Bars Breaching Divergence Line	Select to filter out price bars that breach the divergence line either with their closing value or any value in-between high and low (see Bars/Oscillator Crossing Divergence Line)
Filter For Oscillator Breaching Divergence Line	Select to filter out oscillator values that breach the divergence line (see Bars/Oscillator Crossing Divergence Line)
Allow Divergence Line to Span Multiple Trading Sessions	Should divergences be allowed to span multiple trading sessions
Divergence Lookback Number of Peaks	Number of peaks to look through for divergence (see Divergence Lookback)
Divergence Lookback Use Nearest/Furthest Peak	Select whether to prefer the furthest or nearest diverting peak found in the lookback
Divergence Line Slope Filter Minimum Price Difference Units	Select whether to use difference in points or percentage when filtering out divergences that are too small
Divergence Line Slope Filter Minimum Price Difference	Minimum difference between two peaks to be considered for divergence
Divergence Line Filter Minimum Oscillator Difference	Minimum difference in points between two oscillator values to be considered for divergence

Subgraphs

Subgraph	Description

Subgraph	Description
Regular Bullish Divergence	Is plotted on bars where a Regular Bullish Divergence is detected. Up arrow by default.
Hidden Bullish Divergence	Is plotted on bars where a Hidden Bullish Divergence is detected. Up arrow by default.
Regular Bearish Divergence	Is plotted on bars where a Regular Bearish Divergence is detected. Down arrow by default.
Hidden Bearish Divergence	Is plotted on bars where a Hidden Bearish Divergence is detected. Down arrow by default.

Performance and Tuning

To deal with long load times and sluggishness

Reduce the number of days loaded
Turn the drawings off

Setting up Alerts

Using the SC built-in alerts, add the alert condition below to the study Alerts Tab

Alert condition: or(SG1<>0, SG2<>0)

General Public

T29 Divergence V3