# CDZV RSI/RSX Divergence Indicator
This indicator is part of the CDZV Toolkit, a comprehensive suite of tools designed for automated trading strategies and backtesting. While the indicator can be used standalone for technical analysis, its integration with CDZV Toolkit allows traders to:
- Automate trading decisions based on divergence signals
- Perform detailed backtests of divergence-based strategies
- Integrate divergence signals with other CDZV Toolkit components
- Optimize strategy parameters using historical data
- Generate comprehensive performance reports
## Overview
The CDZV RSI/RSX Divergence Indicator is a sophisticated technical analysis tool that combines RSI (Relative Strength Index) and RSX (a modified RSI variant) to identify both regular and hidden divergences in market price action. This indicator is specifically designed to identify divergences only in overbought and oversold zones, making it more reliable for trading decisions.
## Main Features
### Dual Oscillator System
- **RSI (Relative Strength Index)**: Traditional momentum oscillator
- **RSX**: Modified version of RSI with enhanced smoothing characteristics
- Both oscillators can be used independently or together
### Divergence Types
1. **Regular Divergences**:
- Bullish: Price makes lower lows while oscillator makes higher lows (in oversold zone)
- Bearish: Price makes higher highs while oscillator makes lower highs (in overbought zone)
2. **Hidden Divergences** (Optional):
- Bullish: Price makes higher lows while oscillator makes lower lows (in oversold zone)
- Bearish: Price makes lower highs while oscillator makes higher highs (in overbought zone)
### Smart Filtering System
- Only identifies divergences in significant zones (overbought >70, oversold <30)
- Customizable lookback periods for divergence identification
- Adjustable minimum and maximum range for divergence confirmation
### Visual Features
- Histogram option for better visualization of momentum
- Color-coded signals for easy interpretation
- Customizable colors and line styles
- Transparency settings for better chart visibility
## CDZV Toolkit Integration Features
- Export divergence signals for strategy automation
- Customizable signal conditions for strategy testing
- Performance metrics collection for backtesting
- Integration with other CDZV indicators and tools
- Strategy optimization capabilities
## Customization Options
### RSI Settings
- Enable/Disable RSI
- Volume-based calculation option
- Divergence display toggle
- Period adjustment
- Multiple smoothing types
- Line width and transparency
- Custom color schemes
### RSX Settings
- Enable/Disable RSX
- Volume-based calculation option
- Divergence display toggle
- Period customization
- Smoothing options
- Visual appearance settings
### Divergence Settings
- Pivot lookback parameters
- Minimum and maximum lookback ranges
- Hidden divergence toggle
- Overbought/Oversold levels
### Visual Settings
- Level markers for overbought/oversold zones
- Crossline level
- Histogram customization
- Color schemes for different signals
## Technical Components
### Moving Average Types
The indicator includes multiple types of moving averages for smoothing:
- COVWMA (Coefficient of Variation Weighted Moving Average)
- DEMA (Double Exponential Moving Average)
- EMA (Exponential Moving Average)
- EHMA (Exponential Hull Moving Average)
- FRAMA (Fractal Adaptive Moving Average)
- HMA (Hull Moving Average)
- KAMA (Kaufman's Adaptive Moving Average)
- SMA (Simple Moving Average)
- TEMA (Triple Exponential Moving Average)
- VIDYA (Variable Index Dynamic Average)
- And more...
## Usage Guidelines
1. **Setup**:
- Select preferred oscillator (RSI, RSX, or both)
- Configure divergence settings
- Adjust visual parameters
- Configure CDZV Toolkit integration options if using automated strategies
2. **Signal Interpretation**:
- Regular bullish divergence: Potential reversal from downtrend
- Regular bearish divergence: Potential reversal from uptrend
- Hidden bullish divergence: Trend continuation upward
- Hidden bearish divergence: Trend continuation downward
3. **Best Practices**:
- Use in conjunction with other CDZV Toolkit components
- Perform thorough backtesting before live trading
- Pay attention to the overall market context
- Consider divergences only in oversold/overbought zones
- Use appropriate timeframes for your trading strategy
## Key Advantages
1. **Enhanced Reliability**: Focuses on divergences in extreme zones only
2. **Flexibility**: Multiple customization options for different trading styles
3. **Dual Confirmation**: Option to use both RSI and RSX for validation
4. **Clear Signals**: Visual distinction between regular and hidden divergences
5. **Advanced Smoothing**: Multiple moving average options for better signal quality
6. **Automation Ready**: Fully compatible with CDZV Toolkit's automation features
7. **Backtesting Integration**: Seamless integration with CDZV's backtesting engine
## Note
This indicator is designed as both a standalone technical analysis tool and a component of the CDZV Toolkit. While it can be used independently for manual trading, its full potential is realized when used as part of an automated trading strategy within the CDZV ecosystem. Always use proper risk management and combine with other forms of analysis for trading decisions.