Oscillator Divergence: Stochastic, RSI, TSI, CCI, MACD, and Stochastic RSI Analysis

Understanding Oscillator Divergence

Divergence occurs when price action and an oscillator move in opposite directions, often signaling potential trend reversals. For example:

• Bearish Divergence: Price makes a higher high, but the oscillator forms a lower high.
• Bullish Divergence: Price makes a lower low, while the oscillator forms a higher low.

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Key Oscillators for Divergence Detection

1. Stochastic Oscillator

   • Measures momentum by comparing closing prices to a high-low range.
   • Sub-options: FastK, FastD, SlowD.

2. Relative Strength Index (RSI)

   • Ranges from 0–100; identifies overbought (>70) and oversold (<30) conditions.

3. True Strength Index (TSI)

   • Uses double-smoothed price data to highlight trend strength.

4. Commodity Channel Index (CCI)

   • Evaluates cyclical trends by comparing typical price to its moving average.

5. MACD

   • Tracks trend changes using moving average crossovers.

6. Stochastic RSI

   • Applies Stochastic calculations to RSI values for refined momentum signals.

| Oscillator | Best For | Default Settings |
|------------|----------|------------------|
| Stochastic | Short-term reversals | Length: 14, Smoothing: 3 |
| MACD | Trend confirmation | Fast: 12, Slow: 26, Signal: 9 |

TradeStation Program 62: Unified Divergence Detection

This tool scans for divergences across 6 oscillators with customizable inputs:

Key Features

• Multi-chart compatibility: Works with Renko, Kagi, and tick charts.
• Visual alerts: Draws trendlines between pivots with adjustable colors/thickness.
• User-defined pivot matching: Allows tolerances for bar mismatches (BarTol input).

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Input Parameters

int WhichOsc(1);         // Select oscillator (1–16)  
bool DrawTL(True);       // Enable trendlines  
int BarTol(3);           // Max bar gap for pivot pairs  
string LowerColor("Green"); // Bullish divergence color  

Oscillator Comparison Table

| Oscillator | Strengths | Limitations |
|------------------|----------------------------|----------------------|
| RSI | Clear overbought/oversold | Lags in strong trends |
| Stochastic RSI | Enhanced sensitivity | More false signals |

FAQs

Q: How does Program 62 improve on older divergence detectors?
A: It consolidates 5 legacy programs into one, adds new drawing tools, and supports flexible pivot comparisons via arrays.

Q: Can I modify the unprotected version?
A: Yes—unprotected code ($245) allows full customization of oscillator logic and alerts.

Q: Which markets work best?
A: Forex (EURUSD) and equities (SP500) show reliable signals on 5M–1H timeframes.

Best Practices

• Combine signals: Use MACD divergences with RSI confirmation.
• Avoid noise: Set stricter LeftStrength/RightStrength on lower timeframes.