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Tutorial 26 | An improved stochastic – price divergence indicator

EasyLanguage price/stochastic indicator

Tutorial 26 applied to a 1 minute IBM chart

Some technical traders view divergence as indicating a possible change in price direction. This tutorial demonstrates how to create a TradeStation EasyLanguage indicator that looks for divergence between consecutive price and stochastic pivots. If potential divergence is found a line is drawn between the price pivots.

The program works by looking for two low pivots in price over a user input number of bars. It does the same for a stochastic indicator over the same number of bars. If the program finds two low price and two low stochastic pivots it then checks to make sure that:

  • The first price and stochastic pivots occurred within a user input number of bars of each other
  • The second price and stochastic pivots occurred within a user input number of bars of each other
  • There was divergence (i.e. the second price pivot was LOWER than the first price pivot, BUT the second stochastic pivot was HIGHER than the first stochastic pivot
  • A price pivot or stochastic just occurred

If all these conditions are fulfilled, a line is drawn between the two price pivots using the TradeStation TL_New functionality.

The equivalent functionality is included for high pivots.

Programming lessons


The tutorial demonstrates how to:
  • Use the Pivot function to search for price and stochastic pivots
  • Check that price and stochastic pivots occurred within a user input number of bars of each other
  • Draw lines using the TL_New functionality

This video tutorial explains how to create an indicator that searches for occasions of divergence between price an a stochastic indicator.

Tutorial 26 applied to a 15 minute EURUSD chart

To avoid typing the indicator, you may download an ELD for only $29.95:

Video Part 1

In the second part of this tutorial I describe how you can modify the program created above to also look for divergences at the high side (i.e. when a price pivot makes a higher high, or highs are equal, but the top pivot on the stochastic makes a lower high.

Video Part 2

To avoid typing the indicator, you may download an ELD for only $29.95:

Tutorial 26 applied to a 15 minute @ES chart

If you see any errors in this tutorial – or I have not made something clear, I would be most grateful if you could please contact us. Also, let me know if you have any ideas for new tutorials.

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