Divergence Indicators - page 34

[Sergey Golubev]

Building a Divergence System: Creating the MPO4 Custom Indicator

Most traders are familiar with oscillators like the Relative Strength Index (RSI) or the Stochastic. They answer the question: Where is the price compared to its recent range? They are effective but can be reactive, often lagging at the exact moment you need them most. Furthermore, they treat all price bars as equal, whether it is a tiny doji or a massive volatile candle. This is where the MPO4 diverges, not just in its signals, but in its foundational philosophy.

[Sergey Golubev]

Building a Divergence System (Part II): Adaptive SuperTrend Custom Indicator

In the previous article, we introduced MPO4, a pressure-based oscillator that measures the directional effort behind price movements by weighting candlestick bodies against recent volatility. Combined with a non-repainting pivot-detection engine, it enabled us to identify bullish and bearish divergences, revealing moments when underlying buying or selling pressure begins to weaken before a potential market reversal.

This presents a mechanical challenge for systematic traders: once a divergence warns us that a trend is dying, how should we mechanically adjust our trade management to capitalize on it?