RSI MA Cross + Divergence Signal (V2)

Core Logic

RSI + Moving Average

The script calculates a standard RSI (default 14).

It then overlays a moving average (SMA/EMA/WMA, default 9).

When RSI crosses above its MA → bullish momentum.

When RSI crosses below its MA → bearish momentum.

Divergence Filter

Signals are only valid if there’s confirmed divergence:

Bullish divergence: Price makes a lower low, RSI makes a higher low.

Bearish divergence: Price makes a higher high, RSI makes a lower high.

Overbought / Oversold Filter

Optional extra:

Bullish signals only valid if RSI ≤ 30 (oversold).

Bearish signals only valid if RSI ≥ 70 (overbought).

This ensures signals happen in “stretched” conditions.

Risk & Trade Management

Entries taken only when all conditions align.

Exits can be managed with ATR stops, partial take-profits, breakeven moves, and trailing stops (we coded these in the strategy version).

Cooldown, session filters, and daily loss guard to keep risk tight.

🔹 Strengths

✅ High selectivity: Combining RSI cross + divergence + OB/OS means signals are rare but higher quality.

✅ Great at catching reversals: Divergence highlights where price may be running out of steam.

✅ Risk management baked in: ATR stops + partial exits smooth out equity curve.

✅ Works across markets: ES, FX, crypto — anywhere RSI divergences are respected.

✅ Flexible: You can loosen/tighten filters depending on aggressiveness.

🔹 Weaknesses

❌ Lag from pivots: Divergence only confirms after a few bars → you enter late sometimes.

❌ Choppy in ranges: In sideways markets, RSI divergences appear often and whipsaw.

❌ Filters reduce signals: With all filters ON (divergence + OB/OS + trend + session), signals can be very rare — may under-trade.

❌ Not standalone: Needs higher-timeframe context (trend, liquidity pools) to avoid counter-trend entries.

🔹 Best Ways to Trade It

Use Higher Timeframe Bias

Run the strategy on 15m/1H, but only trade in direction of higher timeframe trend (e.g., 4H EMA).

Example: If daily is bullish → only take bullish divergences.

Pair With Structure

Look for signals at key zones: HTF support/resistance, VWAP, or FVGs.

Divergence + RSI cross inside an FVG is a strong entry trigger.

Adjust OB/OS for Volatility

For crypto/FX: use 35/65 instead of 30/70 (markets trend harder).

For ES/S&P: 30/70 works fine.

Risk Management Is King

Use partial exits: take profit at 1R, trail rest.

Size by % of equity (we coded this into the strategy).

Avoid News Spikes

Divergences break down around CPI, NFP, Fed announcements — stay flat.

🔹 When It Shines

Trending markets that make extended pushes → clean divergences.

Reversal zones (oversold → bullish bounce, overbought → bearish fade).

Swing trading (15m–4H) — less noise than 1m/5m scalping.

🔹 When to Avoid

Low volatility chop → lots of false divergences.

During high-impact news → RSI swings wildly.

In strong one-way trends without pullbacks — divergence keeps calling tops/bottoms too early.

✅ Summary:
This is a reversal-focused RSI divergence strategy with strict filters. It’s powerful when combined with higher-timeframe bias + structure confluence, but weak if traded blindly in choppy or news-driven conditions. Best to treat it as a precision entry trigger, not a full system — layer it on top of your FVG/ORB framework for maximum edge.