#### What is a divergence?

A divergence occurs when the price and an oscillator moves in different direction.

For example, normally an oscillator (such as the RSI) will move the same direction as the price (i.e. if the price makes a lower high, the RSI will follow and also make a lower high). If however the price makes a higher high, yet the oscillator makes a lower high, that's a divergence (Regular Bearish). It is called a "divergence" because the price and the oscillator "diverged". The idea is that whenever a divergence occurs, that MAY be a signal of the price changing direction (regular divergences), or continuing in the same direction (hidden divergences).

The four different divergences that are supported by the indicator are:

1. Regular Bullish (when price makes a lower low, but the oscillator makes a higher low)
2. Hidden Bullish (when price makes a higher low, but the oscillator makes a lower low)
3. Regular Bearish (when price makes a higher high, but the oscillator makes a lower high)
4. Hidden Bearish (when price makes a lower high, but the oscillator makes a higher high)

#### Is it a lagging indicator?

Yes and no, depending on how you configure divergence detection.

Generally speaking, divergences are meant to be searched for whenever the price or the oscillator makes a new pivot (i.e. a swing low or a swing high). Once a new pivot forms, you look at the previous pivot(s) on both the price and the oscillator, and see if you can spot a divergence. While this is normally the best way for spotting for divergences, this results in them only being confirmed several bars after they manifest. Why? To understand this, we first need to look at how a pivots are identified on the chart.

When a new candle forms on the chart (let's call it P), how do you know if it is going to be the next pivot? You wait. At this point you simply don't know if the candles following P will make P look like a pivot. Once a new candle forms to the right of P, you need to look at two things:

1. Do the candles that come before P are all lower than P?
2. Do the candles that come after P (in this case just this one candle so far) are all lower than P?

If the answer is yes to both of these questions, you may start to suspect that P is indeed becoming the new pivot (high in this example). Can you however be 100% sure that the next candle will also stay lower than P? No you can't. It could be that the 2nd candle forming to the right of P is actually going to close higher than P. Would this immediately invalidate your theory that P is becoming the next pivot? Yes it certainly would. Using only a single candle to the right of P as a way to confirm it being a pivot is generally not a good idea. How many candle should you wait then? There is no right answer here, however it can be said that the more candles you wait for to form, the more likely you are going to correctly identify P being pivot.

So the more candles you wait to form to confirm a pivot, the higher your detection accuracy will be, but at the same time the slower your pivot identification process becomes. If you think that 4 candles forming after P is good enough for you to confirm it being a pivot - great, but this also means that your divergences will only be signalled once P has been confirmed as a pivot, which is 4 candles after P. On a 5 minutes chart it means your divergence alert will come 20 minutes (4 x 5 minute candles) "late". On a 4 hour chart, it will be 16 hours (4 x 4 hour candles) "late".

What we've discussed above, is the non-early detection algorithm, also known as the 2 pivots based detection algorithm. For divergences to be identified you need 2 pivots confirmed on your chart. One at the starting point of the divergence, and one at the ending point.

While this is the most accurate way of identifying divergences, the indicator also supports a "1 pivot based divergence detection algorithm", which in the indicator we refer to as the "early detection" algorithm.

When early detection is enabled, the indicator will simply treat every single candle as the next potential pivot. If at the moment of the closing the rightmost candle the price is going one direction, while the oscillator is going the opposite, it is assumed that a divergence is about to form, and the indicator will signal it as an "early divergence". You may think of the early detection algorithm being the same as the non-early algorithm, but with a 0 candle delay, and you would be completely right. Is the early detection algorithm going to give you accurate divergence signals? Based on what we have discussed above, very likely not, however when it is used for what it was designed for (notification of a potential divergence forming) it can be a powerful tool.

#### Does it repaint?

No. The indicator is programmed in such a way, that it only registers pivots and divergences on the close of a candle. This makes it detect the exact same divergences during backtesting and forward-testing (i.e. when you use it for alerting purposes).

#### Can the indicator send me an alert when a divergence is detected?

Yes*. The indicator can send you an alert whenever any of the four supported divergence is detected. You can even set up alerts on the pivot low / high confirmations themselves.

Please note that divergences are normally signalled on the candle on which the ending pivot of the divergence was confirmed (marked with purple triangle), which is usually several candles after the ending point of the divergence. For more info on this delay, please see the "Is it a lagging indicator?" section above.

*: Pro feature

#### Will it make me rich?

Will the use of the indicator alone make you rich financially? NO.

If however what you mean by rich is "richer in free time", then the answer is a definite YES.

You should look at the indicator as a tool to save you time, not to print you money. By putting it to work, you will be able to stop your daily routine of scanning dozens of charts just for the purpose of identifying divergences. The indicator will take care of this mundane task for you. This will result in a lot of time being freed up for you to do more important things in your life.

The Divergent is a divergence indicator, nothing else. It is excellent at spotting divergences, but it does not have a crystal ball. If it tells you that it sees a Regular Bullish divergence, that's all there is to it. It does not tell you that the price will change its direction, it simply tells you that it spotted a divergence. How you interpret this signal, is completely up to you. Whatever you do, please do not make trading decisions on the presence of a divergence alone (see next question).

#### Can I enter into a trade on the presence of a divergence alone?

Please don't do this. Divergences on their own should not be used as a trade signal under any circumstance. You should always seek for confluence from several other indicators to decide whether to act on a divergence or not.

#### What is the best timeframe to use the indicator on?

This all comes down to the answering the following question: What is the best timeframe to detect divergences on?

In general, it can be said that the higher the timeframe (1 hour+), the more likely that the divergence is a signal, and not just a noise. While you can apply the indicator to a 1 minute timeframe on TradingView, we do not recommend doing this. The indicator will be signalling divergences up and down and left and right, and you will find that very few of those are actually going to play out.

You can also try to answer this question yourself. Place the indicator on a 5 minute chart, scroll back to the beginning of time, and go through each signalled divergence one by one and see if they correctly predicted where price was about to move. Repeat this exercise on multiple timeframes, and see which one gives the best predictions.

#### Is every single detection accurate?

No. No computer can replace the human eye (at least not in a Pine Script indicator), and its accuracy for spotting divergences. The Divergent will inevitably send out false positive signals every now and then. However, if you spend some time tweaking its filters, you will be able to reduce the false positive detection to a minimum. For example, if you enable the built-in Line of Sight ™ filter, only those divergences will be considered valid, where the lines that connect the two ends of the divergence is not interrupted by any price candles. There are many other filters available to allow you to further minimise the number of false positive detections.

#### Can I use it as part of an automated trading strategy?

While technically possible, it is not a good idea to do so.

As mentioned in the section above, the indicator will emit false positive signals from time to time. You just simply cannot eliminate all of them in a Pine Script indicator.

With this in mind, we highly recommend that you always confirm (with your eyes) the signalled divergence being a valid one before taking any action.

#### How do I cancel my subscription?

Please note that once you cancel your subscription, as soon as the subscription becomes inactive (1 month following your last payment), you will lose access to the indicator.

#### Does it only work on TradingView?

Yes, the indicator was developed specifically for the TradingView platform, however using 3rd party tools (such as PineConnector) you should be able to plug the alerts into other systems, like MetaTrader.

#### Do I need to have a paid TradingView subscription in order to use the indicator?

No, you can get started with a Basic (free) account on TradingView, however if you plan to set up multiple alerts (which should be your main motivation for using The Divergent!), you will need to subscribe to one of their paid plans. The basic TradingView subscription only lets you have a single alert active at a time.

#### Do you have any documentation available?

Yes, The Divergent comes with a 45+ page PDF which goes into the details of every configuration option. Once you become a subscriber, you will receive the link to the document.

On top of this PDF, we also have each and every configuration documented in the indicator settings window. Simply hover your mouse over the ( i ) icon next to each input to learn more about its purpose.