ATR Divergences [UAlgo]

Divergence is a concept in financial markets that highlights inconsistencies between the price of an asset and a given indicator. This script focuses on identifying divergences using the Average True Range (ATR). Divergence occurs when there is a disparity between the direction of the price and the oscillator, providing valuable insights for traders anticipating potential trend reversals.

This script employs pivot points (with using High-Low values of the candles) to identify potential divergences between the oscillator (ATR) and price movements. Here's how each type of divergence is determined:

Key Features:

Regular Bullish Divergence:

Oscillator registers a higher low.
Price records a lower low.
Indicative of potential upward reversal.

Hidden Bullish Divergence:

Oscillator indicates a lower low.
Price exhibits a higher low.
Signals a concealed bullish continuation pattern.

Regular Bearish Divergence:

Oscillator shows a lower high.
Price marks a higher high.
Suggests a possible downward reversal.

Hidden Bearish Divergence:

Oscillator reflects a higher high.
Price displays a lower high.
Indicates a hidden bearish continuation pattern.

Usage and Customization:

ATR Length: Adjustable parameter for customizing the Average True Range calculation period.

Plot Options: Choose to display Regular Bullish, Hidden Bullish, Regular Bearish, and/or Hidden Bearish divergences.

Wait for Candle Close: Option to wait for candle closure before plotting signals.
How to Interpret:

Regular divergences may indicate potential trend reversals, while hidden divergences suggest a continuation of the current trend. Traders can leverage these signals to make informed decisions in their trading strategies.

Feel free to customize the parameters based on your trading preferences. Happy Trading!

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Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.


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