With RSI Divergence Indicator you are able to anticipate a coming change in the trend. Relative Strength Indicator is leading indicator for a trend change!
When divergence arises between RSI indicator and the price it means that forthcoming end of current trend is near. RSI divergence Indicator signals will appear in advance of a trend change. But be careful as RSI divergence is not very good at exact indication of a trend change. The divergence signal may show at exact time when trend changes, or several hours, days, weeks before the trend change. Technical traders usually use the RSI Divergence Indicator as an early warning system to enable them to get ready and prepare for a forthcoming trend change.
When the RSI Divergence Indicator and chart price line moves in the same direction we have a confirmation that the existing price trend is unlikely to change. We can get the same information from just looking at the chart, so these signals are not very important BUT when the RSI line slopes differently from the price chart line, a divergence happens. When RSI Divergence Indicator indicates this change below the 30% area on the RSI, or forms a peak above the 70% level, they are most reliable indications of a Divergence.
Divergence signals give an advantage to the trader by confirming an entry in the bullish or bearish trend. It can be used to get out of an trend when it weakens. Divergence signal does not occur each and every time when a trend changes, but when it does, it will deliver a strong confirmation that a trend change is coming.
This are the available settings for RSI Divergence Indicator:
- period: select how far back RSI is calculated from candles
- drawIndicatorTrendLines: if set to true it will draw trendlines on the RSI Divergence Indicator
- drawPriceTrendLines: if set to true it will draw trendlines on the MT4 Chart
- displayAlert: if set to true it will show alert when RSI Divergence has formed
- DisplayClassicalDivergences: if set to true it will show Classical Divergences
- DisplayHiddenDivergences: if set to true it will show Hidden Divergences
How to install RSI Divergence Indicator in MetaTrader 4 / MT4:
- Download/Copy/Save the MQ4/EX4 file into your C:\Program Files\MetaTrader 4\experts\indicators folder (or change the folder to your installation sometimes forex broker name)
- Restart your MetaTrader 4 application (assuming it’s currently open) … or Launch your MetaTrader 4 application
- On the left hand side, look for the “Navigator” window and under the “Common” tab, look into the “Custom Indicators” section
- Locate the indicator which you have just downloaded into the folder stated in Step 1
- Drag (Click and drag) the indicator onto the chart
- Choose your settings and click OK.
- TADA and your done!