Calculation of a TP trough RSI Divergence

This topic has 26 replies, 2 voices, and was last updated 2 years ago by Zigo.

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12/21/2020 at 5:28 PM #154753

Zigo

I note that in most cases, and speaking of more than 75%, of cases, the calculated Target price (TP) is met. The chart shows both the purchase price and the TP. A green rectangle, for upward rates and a red rectangle for downward rates, indicates the 2 candles where the divergence ends. The TP (line) is printed in the graph, green for upward calculation and orange for downward calculation.

Depending on the timeframe, purchased (OB) and sold (OS) are adjusted. The period for the RSI is usually 11 and not 14. The variables are for period (n) for overbought (OB) and for over sold (OS). If someone feels called to test these kinds of parameters in a backtest. In that case, I would kindly like to know the results.

Zigo

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12/21/2020 at 5:35 PM #154755

Zigo

See attachment for the opposite direction.

Zigo

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12/21/2020 at 5:53 PM #154757

Zigo

The coding for RSI TP is based on a lookback period of 29 (see line 53 and 73), if you change this value, for example to the first top (bottom) the calculation becomes different so as the results. Maybe if backtest there would be a variable number instead of 29 it could be optimised.

Here is the coding:

// --- settings
//Zigo 21/12/2020
RSIp=n //RSI period
once obLevel=ob //overbought level
once osLevel=os //oversold level
minimalBars=5 //minimal count of bars where RSI is ob or os
// --- end of settings
 


irsi = rsi[RSIp]
ob = irsi>obLevel
os = irsi<osLevel
 
if ob then
if not ob[1] then
maxrsi = 0
maxprice = 0
firstobbar = barindex

endif
maxrsi=max(maxrsi,irsi)
maxprice=max(maxprice,high)
if maxrsi<>maxrsi[1] then
maxrsibar=barindex
endif
endif
 
if os then
if not os[1] then
minrsi = 100
minprice = close*100
firstosbar = barindex
endif
minrsi=min(minrsi,irsi)
minprice=min(minprice,low)
if minrsi<>minrsi[1] then
minrsibar=barindex
endif
endif
 
Once divsell=0

if irsi crosses under obLevel then
//verif divergence
div = maxprice>oldmaxprice and maxrsi<oldmaxrsi and (barindex-firstobbar)>=minimalBars
if div then
s=(High[0]+low[0])/2
drawsegment(oldmaxrsibar,oldmaxRSI,maxrsibar,maxRSI) coloured(255,255,0, 255)
DRAWRECTANGLE(barindex, low-AverageTrueRange[14](close), barindex[1], low[1]-3*AverageTrueRange[14](close))coloured(255,55,25,255)
DRAWTEXT("Start Div RSI Down", barindex, High+2.5*AverageTrueRange[14](close),dialog, standard, 15)coloured(205,170,120,255)
DRAWTEXT("Enter Short = #s#", barindex, High+ 1.5*AverageTrueRange[14](close),dialog, standard, 15)coloured(205,170,120,255)
TPSh= (Lowest[29](low)+ (maxprice-oldmaxprice))
DRAWHLINE(TPsh)coloured(255,0,0,35)
DRAWTEXT("TargetLine = #TPSh#", barindex, TPSh-0.5*AverageTrueRange[14](close),dialog, standard, 12)coloured(205,205,0)
divsell=s
endif
oldmaxrsi = maxrsi
oldmaxprice = maxprice
oldmaxrsibar = maxrsibar
endif
Once divbuy=0

if irsi crosses over osLevel then
//verif divergence
div = minprice<oldminprice and minrsi>oldminrsi and (barindex-firstosbar)>=minimalBars
if div then
b=(open)
drawsegment(oldminrsibar,oldminrsi,minrsibar,minrsi) coloured(0,200,0)
DRAWRECTANGLE(barindex, High+AverageTrueRange[14](close), barindex[1], high[1]+4*AverageTrueRange[14](close))coloured(0,125,175,255)
DRAWTEXT("Start Div RSI Up", barindex, Low-2*AverageTrueRange[14](close), dialog, standard,15)coloured(125,255,125,255)
DRAWTEXT("Enter Long <= #b#", barindex, low-1.5*AverageTrueRange[14](close),dialog, standard, 15)coloured(0,255,0,255)
TPL=(Highest[29](High)- (minprice - oldminprice))
DRAWHLINE(TPL)coloured(0,255,0,35)
DRAWTEXT("TargetLine = #TPL#", barindex, TPL+0.5*AverageTrueRange[14](close),dialog, standard, 12)coloured(0,255,0,255)
divbuy=b
endif
oldminrsi = minrsi
oldminprice = minprice
oldminrsibar = minrsibar

endif
 
return

// --- settings

//Zigo 21/12/2020

RSIp=n //RSI period

once obLevel=ob //overbought level

once osLevel=os //oversold level

minimalBars=5 //minimal count of bars where RSI is ob or os

// --- end of settings

irsi = rsi[RSIp]

ob = irsi>obLevel

os = irsi<osLevel

if ob then

if not ob[1] then

maxrsi = 0

maxprice = 0

firstobbar = barindex

endif

maxrsi=max(maxrsi,irsi)

maxprice=max(maxprice,high)

if maxrsi<>maxrsi[1] then

maxrsibar=barindex

endif

if os then

if not os[1] then

minrsi = 100

minprice = close*100

firstosbar = barindex

endif

minrsi=min(minrsi,irsi)

minprice=min(minprice,low)

if minrsi<>minrsi[1] then

minrsibar=barindex

endif

Once divsell=0

if irsi crosses under obLevel then

//verif divergence

div = maxprice>oldmaxprice and maxrsi<oldmaxrsi and (barindex-firstobbar)>=minimalBars

if div then

s=(High[0]+low[0])/2

drawsegment(oldmaxrsibar,oldmaxRSI,maxrsibar,maxRSI) coloured(255,255,0, 255)

DRAWRECTANGLE(barindex, low-AverageTrueRange[14](close), barindex[1], low[1]-3*AverageTrueRange[14](close))coloured(255,55,25,255)

DRAWTEXT("Start Div RSI Down", barindex, High+2.5*AverageTrueRange[14](close),dialog, standard, 15)coloured(205,170,120,255)

DRAWTEXT("Enter Short = #s#", barindex, High+ 1.5*AverageTrueRange[14](close),dialog, standard, 15)coloured(205,170,120,255)

TPSh= (Lowest[29](low)+ (maxprice-oldmaxprice))

DRAWHLINE(TPsh)coloured(255,0,0,35)

DRAWTEXT("TargetLine = #TPSh#", barindex, TPSh-0.5*AverageTrueRange[14](close),dialog, standard, 12)coloured(205,205,0)

divsell=s

endif

oldmaxrsi = maxrsi

oldmaxprice = maxprice

oldmaxrsibar = maxrsibar

endif

Once divbuy=0

if irsi crosses over osLevel then

//verif divergence

div = minprice<oldminprice and minrsi>oldminrsi and (barindex-firstosbar)>=minimalBars

if div then

b=(open)

drawsegment(oldminrsibar,oldminrsi,minrsibar,minrsi) coloured(0,200,0)

DRAWRECTANGLE(barindex, High+AverageTrueRange[14](close), barindex[1], high[1]+4*AverageTrueRange[14](close))coloured(0,125,175,255)

DRAWTEXT("Start Div RSI Up", barindex, Low-2*AverageTrueRange[14](close), dialog, standard,15)coloured(125,255,125,255)

DRAWTEXT("Enter Long <= #b#", barindex, low-1.5*AverageTrueRange[14](close),dialog, standard, 15)coloured(0,255,0,255)

TPL=(Highest[29](High)- (minprice - oldminprice))

DRAWHLINE(TPL)coloured(0,255,0,35)

DRAWTEXT("TargetLine = #TPL#", barindex, TPL+0.5*AverageTrueRange[14](close),dialog, standard, 12)coloured(0,255,0,255)

divbuy=b

endif

oldminrsi = minrsi

oldminprice = minprice

oldminrsibar = minrsibar

endif

return

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Monobrow,

Zigo

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12/21/2020 at 6:05 PM #154758

Zigo

Dare to use other timeframes then classical timeframes. See the difference between 30 min and 29 min.

Zigo

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12/21/2020 at 6:09 PM #154761

Zigo

The indicator can also in a separate frame.

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PLermite

Zigo

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12/23/2020 at 12:23 PM #154973

Zigo

Update for the targetline. (PXI 29min.)

Zigo

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12/23/2020 at 1:03 PM #154982

Zigo

If the Target Line is more then a few pips the TP will not reached at ones.

Zigo

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12/25/2020 at 3:00 PM #155192

Zigo

At stagnant rates it is sometimes easier to make determinations. Today I looked at the Dow Jones on day chart and established a double “negative divergence” for the RSI (14), albeit with the OB and OS settings 60, 40.

It is nice that the SMI (14,3,5) with OB and OS settings of 40 and -40 respectively shows a similar “negative divergence”. The CCI(18) with the OB and OS settings of 100, -100 closes, also the row with a “negative divergence”.

The future will show whether these divergences will have an impact on the rates.

Zigo

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12/25/2020 at 3:03 PM #155193

Zigo

Sorry, I forgot the attachment.

Zigo

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01/05/2021 at 9:15 PM #156520

Zigo

Double Divergence on Dax today.

Manual calculation:

First TP shortest dotted lines at TP =13665.5-(13754-13730.5)=13742 (inner divergence)

Second TP overlapping divergence at TP=13617-(13769.5-13719.5)=13567 (outer divergence)

Zigo

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01/06/2021 at 10:07 AM #156560

Monobrow

Thanks Zigo, ive been wondering how to calculate a TP from an indicator for a while as im just using fixed values at the moment.

is the general consensus that RSI is the “best” way to do TPs? Have you tried others?

Also for Stops I was playing with the idea of using ichimoku cloud breakouts/breakthrus, but couldnt get it to work, have you worked on any indicator based stop ideas?

thanks again. Awesome code.

Monobrow

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01/06/2021 at 10:20 PM #156677

Zigo

@monobrow

Indeed RSI is the best indicator to calculate a TP.

Thanks for your reply.

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Monobrow

Zigo

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01/07/2021 at 8:41 AM #156693

Zigo

TP calculated on the CCI indicator

Zigo

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01/07/2021 at 8:55 AM #156700

Zigo

Calculated by RSI

Zigo

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01/07/2021 at 9:37 AM #156716

Zigo

Almost reached.

Zigo

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