MACD Divergence - Reversal Hunter

// This Pine Script™ code is subject to the terms of the Mozilla Public License 2.0
// © TradingTools

//@version=5
strategy("MACD Divergence - Reversal Hunter", overlay=true, default_qty_type=strategy.percent_of_equity, default_qty_value=100)

// ─── Inputs ───
macdFast        = input.int(12, "MACD Fast", group="MACD")
macdSlow        = input.int(26, "MACD Slow", group="MACD")
macdSignal      = input.int(9, "MACD Signal", group="MACD")
pivotLookback   = input.int(5, "Pivot Lookback", group="Divergence")
pivotLookfwd    = input.int(2, "Pivot Look Forward", group="Divergence")
useRegular      = input.bool(true, "Trade Regular Divergence", group="Divergence")
useHidden       = input.bool(true, "Trade Hidden Divergence", group="Divergence")
rsiLength       = input.int(14, "RSI Confirmation Length", group="Filters")
rsiOB           = input.float(70, "RSI Overbought", group="Filters")
rsiOS           = input.float(30, "RSI Oversold", group="Filters")
useRSIFilter    = input.bool(true, "Use RSI Extreme Filter", group="Filters")
atrLength       = input.int(14, "ATR Length", group="Risk Management")
atrMult         = input.float(2.0, "ATR Multiplier for SL", step=0.1, group="Risk Management")
rrRatio         = input.float(2.0, "Risk:Reward Ratio", step=0.1, group="Risk Management")

// ─── MACD ───
[macdLine, signalLine, hist] = ta.macd(close, macdFast, macdSlow, macdSignal)

// ─── RSI ───
rsiVal = ta.rsi(close, rsiLength)

// ─── ATR ───
atrVal = ta.atr(atrLength)

// ─── Pivot Detection on Price and MACD ───
pricePivotLow  = ta.pivotlow(low, pivotLookback, pivotLookfwd)
pricePivotHigh = ta.pivothigh(high, pivotLookback, pivotLookfwd)
macdPivotLow   = ta.pivotlow(macdLine, pivotLookback, pivotLookfwd)
macdPivotHigh  = ta.pivothigh(macdLine, pivotLookback, pivotLookfwd)

// ─── Store Previous Pivots ───
var float prevPriceLow   = na
var float prevMACDLow    = na
var float prevPriceHigh  = na
var float prevMACDHigh   = na

var float currPriceLow   = na
var float currMACDLow    = na
var float currPriceHigh  = na
var float currMACDHigh   = na

if not na(pricePivotLow) and not na(macdPivotLow)
    prevPriceLow := currPriceLow
    prevMACDLow  := currMACDLow
    currPriceLow := pricePivotLow
    currMACDLow  := macdPivotLow

if not na(pricePivotHigh) and not na(macdPivotHigh)
    prevPriceHigh := currPriceHigh
    prevMACDHigh  := currMACDHigh
    currPriceHigh := pricePivotHigh
    currMACDHigh  := macdPivotHigh

// ─── Divergence Detection ───
// Regular Bullish: Price lower low + MACD higher low (reversal up)
regBullDiv = not na(prevPriceLow) and currPriceLow < prevPriceLow and currMACDLow > prevMACDLow
// Regular Bearish: Price higher high + MACD lower high (reversal down)
regBearDiv = not na(prevPriceHigh) and currPriceHigh > prevPriceHigh and currMACDHigh < prevMACDHigh
// Hidden Bullish: Price higher low + MACD lower low (continuation up)
hidBullDiv = not na(prevPriceLow) and currPriceLow > prevPriceLow and currMACDLow < prevMACDLow
// Hidden Bearish: Price lower high + MACD higher high (continuation down)
hidBearDiv = not na(prevPriceHigh) and currPriceHigh < prevPriceHigh and currMACDHigh > prevMACDHigh

// ─── RSI Filter ───
rsiLongOK  = useRSIFilter ? rsiVal < rsiOB : true
rsiShortOK = useRSIFilter ? rsiVal > rsiOS : true

// ─── Entry Conditions ───
bullDiv = (useRegular and regBullDiv) or (useHidden and hidBullDiv)
bearDiv = (useRegular and regBearDiv) or (useHidden and hidBearDiv)

// Trigger on new pivot detection + MACD histogram confirmation
longCondition  = bullDiv and not na(pricePivotLow) and hist > hist[1] and rsiLongOK
shortCondition = bearDiv and not na(pricePivotHigh) and hist < hist[1] and rsiShortOK

// ─── Execute Trades ───
if longCondition and strategy.position_size == 0
    sl = close - atrVal * atrMult
    tp = close + (close - sl) * rrRatio
    strategy.entry("Div Long", strategy.long)
    strategy.exit("Div Long Exit", "Div Long", stop=sl, limit=tp)

if shortCondition and strategy.position_size == 0
    sl = close + atrVal * atrMult
    tp = close - (sl - close) * rrRatio
    strategy.entry("Div Short", strategy.short)
    strategy.exit("Div Short Exit", "Div Short", stop=sl, limit=tp)

// ─── Plotting ───
plotshape(longCondition, title="Bull Divergence", location=location.belowbar, style=shape.diamond, color=color.lime, size=size.small, text="DIV")
plotshape(shortCondition, title="Bear Divergence", location=location.abovebar, style=shape.diamond, color=color.fuchsia, size=size.small, text="DIV")

// MACD reference (non-overlay, will show in separate pane if added)
// Users can add MACD indicator separately for visual confirmation

// ─── Alerts ───
alertcondition(longCondition, title="MACD Div Long", message="MACD Divergence: Bullish divergence detected — Long entry")
alertcondition(shortCondition, title="MACD Div Short", message="MACD Divergence: Bearish divergence detected — Short entry")
alertcondition(regBullDiv, title="Regular Bull Div", message="MACD: Regular bullish divergence forming")
alertcondition(regBearDiv, title="Regular Bear Div", message="MACD: Regular bearish divergence forming")