The Divergent Bar indicator was developed by Allison to confirm entering or exiting a trade, or in a more advanced trading strategy, as a confirmation for reversals.
Allison recommends using the Divergent Bars on time frames of 60 minutes or higher, with a minimum of 30 minutes for specific strategies she teaches in her classes.
Divergent High Bar = Bearish Divergent Bar signal
Divergent Low Bar = Bullish Divergent Bar signal
Divergent bars are based on a comparative analysis of higher highs and lower lows.
Back to back divergent bars are an indication of consolidation and squeezes are more likely to appear at this time.
Allison looks for a follow-through signal by seeing if a higher high or lower low occurs within the next three bars / candles after this indicator prints, and when compared to the high or low of the divergent bar that printed, the trader knows its not an overall lifetime higher high/lower low. This is the entry signal she is looking for.
There are no input settings to change on this indicator.
The plots DHScan and DLScan do not affect the indicator on the chart and should not be changed.
The colors of the candles / bars can be changed in the Globals settings.
How to read the Compound Breakout Tool: