MT4 Divergence Indicator (Scanner)

mt4 divergence indicator
MT4 Divergence Indicator is used to identify a common known trading concept (divergence) across different currencies, timeframes and indicators. It includes divergences, calculated based on RSI, Stochastic, MACD, On Balance Volume (OBV) and Awesome Oscillator (AO) indicators. The main concept of a divergence states that a divergence signals about trend continuation or reversal in advance allowing you to use this information in your trading decisions. A divergence is a situation on the market when values of an indicator increase/decrease while price of the trading instrument decreases/increases (so indicator and price diverge on the chart).

MT4 Divergence Indicator (Scanner)

MT4 Divergence Indicator (Scanner) is a special tool that allows you to identify most common indicators divergences, that signal about trend continuation and what is more important – about trend reversal.

The divergence concept states that a trend reversal (or trend continuation after the pullback) can be foreseen by analyzing the behavior of an indicator (RSI, Stochastic, MACD, etc). The indicator will diverge with the price movement revealing the actual intentions of the market.

For example, a Stochastic making lower highs at the same time the price makes higher highs, may signal about a potential and soon trend reversal:

We have designed this indicator in a form of a dashboard in order to allow you to visualize the most recent divergences across currencies and timeframes that interests you in your trading. Such approach provides the ability to see the market in a glance identifying the most potential pairs and timeframes to trade.

 

How to trade using MT4 Divergence Indicator?

The indicator generates buy and sell signals depending on the divergence identified. You have a choice to select different indicators for divergence scan – some traders prefer to base their trading decisions on Stochastic divergence, some on RSI divergence signals. Many traders rely on MACD divergence, OBV divergence (On Balance Volume) and AO divergence (Awesome Oscillator).

Each identified divergence has a label next to it specifying the indicator that was used for this divergence detection and an arrow (up or down) that depicts the direction of a suggested trading decision.

 

How to interpret MT4 Divergence Indicator?

Basically, the indicator draws identified divergences across the market as lines that connect price and indicator vertices pairs as well as entry arrows that depict the suggested trading direction. Green arrows are for buy (long) trades and red arrows signal about a potential sell (short) trade.

The label next to the arrow allows you to see the name of the indicator based on which the divergence was identified. Please note that since divergences are identified using formed indicator vertices, the arrow will appear 2 bars back as a formed vertex is defined as:

  1. Peak has 2 lower highs to the left and to the right from its value
  2. Trough has 2 higher lows to the left and to the right from its value

 

 

How to read MT4 Divergence Indicator dashboard?

The dashboard allows you to see the market in a glance in relation of divergences identified on different currency pairs and timeframes using different indicators:

 

Each currency pair/timeframe cell contains several boxes, each of them showing the most recent divergence found on this particular currency pair/timeframe chart using this particular indicator.

The color of the box specifies whether the divergence was a bullish or a bearish – the more bars ago the pattern was identified, the paler the color of the cell will be.  This allows you to select the most relevant chart to trade.

Clicking on the related cell will change your chart to the instrument, timeframe and indicator of the clicked cell.

 

MT4 Divergence Indicator input parameters

The indicator input parameters are pretty straightforward and self-explanatory. It allows you to select the currency pairs and timeframes that you want to monitor. Parameter “max_bars” limits the amount of calculations in order to speed up the indicator in case you do not need it to calculate divergences too far in the past.

 

The indicator allows you to select which indicators you want to use for divergences identification as well as to set any related indicators’ parameters.

 

Disclaimer 

Nordman Algorithms is not liable for any risk that you face using the software. Please, use the software on your own responsibility. The software is coded in accordance with a common known concept and Nordman Algorithms does not guarantee accuracy or trading performance of the software signals.

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