RSI/momentum divergence w/HGI

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eRIKb81
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Joined: Wed Jul 05, 2017 6:03 am

RSI/momentum divergence w/HGI

Post by eRIKb81 »

Before I learned of this forum got interested in 'knoxville divergence'. It's something I found when I just started researching Forex trading. It's a divergence between momentum and RSI. Google it for details, with some good Googling you may find the indicator, I cannot give it to you because it is not my code. Copyright and such.

It shows you when the market is holding back, usually when it reaches a SR/pivot/fibonacho line, and works on all timeframes. I'll add some pictures in the end, to show you what it's all about.

The problem with this divergence is that it may occur in trends, when the market is holding back a bit, but still going the wrong way (the small dips in a trend), so it is not a trade signal by itself, it needs a trigger. I have traded this signal on it's own and it gives about 40/60 win/loss with a 1:1 RR, so it does need something extra. It does way better with a soft martingale (double trade on the next signal when distance=x pips). I've tried some (zero-lag) MA's, lowpass filters (better), and even a neural network (and yes, that worked. No, i will not share that). But it needs a better trigger.

Lo and behold HGI (all hail the Bob!). If there was a divergence, wait for the trigger (HGI big arrows/RADs) and trade.
Exit signals are a HGI reverse signals. Blue waves should be ignored because the divergence signal is earlier than the blue waves; if you exit on a blue wave you cut yourself short. Remember how blue waves followed by a big arrow are a huge signal? This one is faster.

So there is the trade idea.

if (Divergence(lastNumberOfCandles))
if (HGISignal)
return profit; // ;)

And yes, i know HGI signals lag and aren't realtime, but the combination gives very strong signals on every timeframe, it might even work as a scalper.

I'll add another screenshot of today's EURUSD M5. Not an ideal situation but watch the yellow divergence lines and the 10 pip possible profit. That screenshot had 20 pips (with TP=10) in one day without false signals. Set TP to 5 and trade all the major pairs === profit.

I have been coding a bit and might produce something, but i really cannot share the divergence code, because it is not mine. The idea itself is not copyrighted, so if somebody else can have a go at it? Public knowledge is RSI period=21, momentum period=20, both on closed candles.

EDIT: the yellow/red lines is what you are looking for
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renexxxx
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Joined: Sat Dec 31, 2011 3:48 am

RSI/momentum divergence w/HGI

Post by renexxxx »

eRIKb81 » Fri Dec 08, 2017 8:01 am wrote: The idea itself is not copyrighted, so if somebody else can have a go at it? Public knowledge is RSI period=21, momentum period=20, both on closed candles.
I did (have a go).

I looked at this video to see how they scan for these divergence's and did something similar in the attached code. As you can see, the additional constraint to have the 21-period RSI above the 70.0 or below the 30.0 is so strict, that it won't show any lines. However, if you drop these limits to 50.0 and 50.0 (or 60.0 and 40.0), you will get some action (no idea if this comes close to the 'real' thing):
Knoxville.PNG
R.

Edit: 2017.12.10: Made a tiny change to the indicator code. As per Rob Booker's definition, the RSI only needs to exceed the given limits for any of the candles that are part of the divergence ... This code change produces (slightly) more divergences.
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forextraderaz
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Joined: Fri Feb 21, 2014 3:56 pm
Location: Arizona

RSI/momentum divergence w/HGI

Post by forextraderaz »

This is great thank you so much! Having alerts built in the indicator would sure help while manually trading. Now we just need a simple EA using this method :)
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renexxxx
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Posts: 860
Joined: Sat Dec 31, 2011 3:48 am

RSI/momentum divergence w/HGI

Post by renexxxx »

forextraderaz » Sat Dec 09, 2017 1:56 am wrote: Now we just need a simple EA using this method :)
It shouldn't be too hard to create a little function for Knoxville Divergence that can be slotted in any of the existing HGI EAs. However, first I'd need to see some evidence of the added value of using this method for filtering out HGI signals.
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