RSI Divergence can be a great way to spot potential trading opportunities.
But it can also be easy to miss these opportunities because you’re working or just busy with everyday life.
It can also be difficult to spot these opportunities on the chart if you are distracted.
So I’ll show you how TradingView makes it easy to spot these opportunities with their free built-in indicator.
TradingView is a fantastic trading and charting platform and you can learn more about why I switched to TradingView here.
What is RSI Divergence?
Divergence is a term that refers to when the Relative Strength Index (RSI) has a reading that is different (divergent) from the price.
Here is an example where the second and third price highs are higher than the first high, but the RSI highs are lower.
This is a bearish signal as seen at the bottom of the chart.
As you can see, this trade ended well.
Sometimes these discrepancies can be hard to spot, even if you know what to look for. That’s where an index can help a lot.
Before I get into the indicator, to learn all the details about the RSI Divergence and see more examples, read this guide.
How to add the indicator to your chart
Adding the indicator to your chart is easy.
Just click on indicators button at the top of the screen in TradingView. Then, in the search box, type: “deviation rsi“.
This will display a list of indicators and trading strategies that help with the RSI Divergence.
Select the first indicator in the list.
This is the official indicator developed by TradingView.
Once you click the link, the indicator will be added to your chart.
How to set the indicator
The indicator has simple settings that you can use to fine-tune your signals.
I like it when there are only a few settings.
Many times, developers bother and create dozens of settings that are not necessary.
To change the settings, right-click on the indicator and select Settings.
The next window will allow you to change the settings. The first 2 settings are standard RSI settings.
Change these settings depending on what you’re using.
Settings that can be a bit confusing are explained here:
- Rotate review right: The number of candles to look to the right for a pivot (top or trough), from a pivot, to be used as a divergence point. I guess technically that would be a look forward, not a look back.
- Rotate back left: The number of candles to look to the left for a pivot (peak or trough), from a pivot, to be used as a point for divergence
- Maximum review range: The maximum number of candles to be included in a divergence
- Minimum review range: The minimum number of candles to be included in a divergence
From there, you can choose which deviations you want to see on your chart.
Click on Okay button when you’re done.
Add an RSI divergence alert to receive notifications on your phone
Another fantastic thing about TradingView is that you can set up alerts on most indicators.
This means you can receive notifications in the mobile app or via email.
To set notifications on the indicator, right-click anywhere on the indicator. Then choose Add notification…
At the top of the notification window, select the type of deviation you want to receive notifications about.
In this example, I’m setting up notifications for Normal Decline Deviation.
Create a separate alert for each type of deviation you want to be notified about.
Other RSI Divergence Tools in TradingView
The great thing about TradingView is that you can use free trading indicators and strategies that other people have developed on the platform.
This can help you refine your strategy or test new ideas.
To see all available RSI Divergence indicators and strategies, follow the same steps above to add the RSI divergence indicator to your chart.
But instead of adding the default indicator under Technicallylook below this at Community Scripts Unity.
Here you can try other indicators and trading strategies.
In many cases, user generated scripts are not great. Just like in the MetaTrader codebase, most of it is half-baked.
But once in a while, you’ll find an awesome one that’s super useful.
You can also quickly review trading strategies at Strategic controllerwhich gives you instant feedback on how good the strategy is.
So even if you don’t see anything useful right now, keep checking back because the community is adding new scripts all the time.
Does RSI Divergence Really Work?
There are several ways to trade RSI Divergence.
You can learn many RSI Divergence trading methods on blogs or YouTube.
I’ve posted some of my backtesting results here. My test was profitable, but needs some optimization.
However, it is a good starting point and you can try some optimizations yourself.
The most important thing to understand if you want to be successful with RSI Divergence is that you need to develop a trading strategy that works for you.
This means you need to recheck your RSI trading strategy. You can start with this tutorial.
If you want to learn the full process, watch my StrategyEVO Backtesting course.
conclusion
So if you love TradingView for charting like I do, then this indicator makes it super easy to see the divergence and get an alert when it happens.
The best part is that this easy-to-use indicator comes bundled with TradingView and you don’t have to pay anything extra.
To get a free trial of TradingView, go here.
