TouchGrass - The Indicator. The AI. The Edge.

What Are Divergences?

A divergence occurs when price and an indicator move in opposite directions. This signals that the current trend may be losing momentum and could reverse.

💡 Why Divergences Work: They reveal the hidden story behind price. When price makes a new high but momentum doesn't confirm it, buyers are exhausted.

📈 Bullish Divergence

• Price makes a LOWER LOW
• RSI makes a HIGHER LOW
• Signals potential reversal UP
• Indicates selling pressure is weakening

✅ Traders are more willing to buy at lower prices. Hidden strength building.

📉 Bearish Divergence

• Price makes a HIGHER HIGH
• RSI makes a LOWER HIGH
• Signals potential reversal DOWN
• Indicates buying pressure is weakening

⚠️ Buyers are losing conviction. The rally is running out of steam.

Why Momentum RSI?

TouchGrass uses RSI of Momentum instead of regular RSI. This is the same approach used by ChartPrime and other premium indicators.

❌ Regular RSI

• Based on price closes
• Slower to react
• More false signals
• Misses early divergences

✅ Momentum RSI

• Based on rate of change
• Faster to react
• More reliable signals
• Catches divergences earlier

🧮 Technical Detail: We calculate ta.rsi(ta.mom(close, 10), 14) — the RSI of the 10-period momentum, with 14-period RSI smoothing.

🎯 How to Trade Divergences

Wait for the Label

TouchGrass plots "BULL DIV" or "BEAR DIV" labels when it detects a valid divergence. Don't try to anticipate — let the indicator confirm.

Confirm with Price Action

A divergence is a warning, not an entry signal. Wait for price to confirm: a break of structure, a candle pattern, or a key level test.

Place Your Stop

Bull Div: Stop below the divergence low.
Bear Div: Stop above the divergence high.

Target Key Levels

Use VWAP, PDH/PDL, or ORB levels as profit targets. Divergences often lead to moves that test these key levels.

⚙️ TouchGrass Settings

Setting	Default	What It Does
RSI Length	14	Smoothing period for RSI calculation
Min Bars Between Pivots	5	Minimum distance between divergence points
Max Bars Between Pivots	50	Maximum distance (avoids stale divergences)
Pivot Lookback	5	Bars to look back for pivot confirmation

⚠️ Common Mistakes

✗Trading divergences against the trend. In a strong uptrend, bearish divergences can fail repeatedly. Context matters.
✗Entering immediately. A divergence is a warning, not a signal. Always wait for confirmation.
✗Ignoring the timeframe. Divergences on higher timeframes (1H, 4H) are more reliable than on 1-5min charts.
✗No stop loss. Even good divergences can fail. Always protect your capital.

📊 Success Rate

When traded with proper confirmation and risk management, momentum-based divergences have a success rate of approximately 65-75% on 15-minute timeframes and higher.

* Based on backtesting data. Individual results may vary. Always use proper risk management.

Momentum Divergences