RaposaDivergenceV1 Strategy: The Divergence Hunter
Nickname: Reversal Hunter, Peak-Valley Detective
Job: Specializes in finding divergence signals, catching reversal points
Timeframe: 5 minutes
I. What is This Strategy?
Simply put, RaposaDivergenceV1 is:
- A strategy that specifically looks for "divergence" signals
- Price and RSI indicator moving in opposite directions? It enters
- Uses mathematical methods to precisely find peak and valley points
It's like a detective with a magnifying glass looking for turning points 🔍
⚠️ First, Let's Talk About a Big Pitfall
The author wrote in the code:
"argrelextrema might have look-ahead bias so results in backtest will not be reliable"
Translation: This strategy's backtest results might be inaccurate because it uses a "future function." During backtesting, it might "see the future" to confirm signals, but live trading can't do that.
II. Core Configuration: Profit Targets Are Pretty Aggressive
Take-Profit Rules (ROI Table)
0 minutes: Make 15% and run!
60 minutes: 2% is fine too...
120 minutes: Even 1% is okay
After 180 minutes: Even 0.1% is good enough
Translation: Initially wants to make 15%, but after waiting an hour, only wants 2%. Expectations drop pretty fast.
Stop-Loss Rules
Fixed stop-loss: -30% (30% again...)
Trailing stop: Activates after 2% profit, locks in 1%
Translation: Stop-loss is set pretty wide, but trailing stop provides some protection.
III. Buy Condition: Only Bullish Divergence
Core Logic (Plain English Version)
What is bullish divergence?
- Price makes a new low
- But RSI indicator doesn't make a new low
- Meaning: Downward momentum is exhausting, might bounce!
In plain English:
"Price is still falling, but with less force — prepare to buy the dip!"
Buy Condition Breakdown
Price forms a higher low (bullish divergence)
RSI also forms a higher low (confirmation)
RSI < 50 (not buying in overbought territory)
Has volume
Peak-Valley Detection Algorithm
This strategy uses a mathematical function called argrelextrema to find peak and valley points.
Plain English:
"Like finding the highest and lowest points of a mountain range — automatically identified using mathematical methods."
Parameter explanation:
| Parameter | Default | Plain English |
|---|---|---|
| order | 5 | Look at 5 candles on each side to determine if it's a peak/valley |
| K value | 2 | Need 2 consecutive extrema to confirm a real peak/valley |
IV. Sell Condition: Bearish Divergence (But Author Says It Doesn't Work Well)
Sell Logic
What is bearish divergence?
- Price makes a new high
- But RSI indicator doesn't make a new high
- Meaning: Upward momentum is exhausting, might drop!
Plain English:
"Price is still rising, but with less force — prepare to exit!"
But the Author Said...
"sell signal seems like garbage"
Translation: The sell signal seems like trash...
My Advice: Don't count on the sell signal, rely on ROI and trailing stop to exit.
V. Protection Mechanisms: Just These Few
| Protection Type | Parameter | Plain English |
|---|---|---|
| Fixed stop-loss | -30% | "If losing big, run" |
| Trailing stop | 1% @ 2% profit | "Lock in some profit after making some" |
| Tiered ROI | 15%→2%→1%→0.1% | "The longer you wait, the less picky you are" |
Simple and rough, no complex protection logic.
VI. This Strategy's "Personality Traits"
✅ Advantages (Compliment Section)
- Solid theory: Divergence is classic technical analysis, not some esoteric stuff
- Precise algorithm: Uses scipy scientific computing library, not self-made hacks
- Clear signals: Bullish divergence buy, bearish divergence sell, simple rules
- Few parameters: Just 4 parameters, unlike some strategies with dozens
⚠️ Disadvantages (Roast Section)
- Future function: Backtest results are unreliable, this is the most fatal issue
- Poor sell signal: Author admits the sell signal is garbage
- Few signals: Divergence doesn't happen often, might not see a signal for days
- Stop-loss too big: 30% stop-loss, if you hit a trending market you're screwed
VII. Applicable Scenarios: When to Use It?
| Market Environment | Recommended Action | Reason |
|---|---|---|
| Oscillating transition | Can use | Divergence signals are more accurate |
| Single-direction trend | Don't use | Will get repeatedly stopped out |
| High volatility | Increase order | Filter noise extrema |
| Low volatility | Decrease order | Capture more signals |
VIII. Summary: How's This Strategy Really?
One-Sentence Review
"A divergence strategy with more academic value than live trading value. Backtest looks good but don't take it seriously."
Who Is It For?
- ✅ Programmers who want to learn divergence detection algorithms
- ✅ Players in oscillating trend-transition markets
- ✅ People who can accept differences between backtest and live trading
- ✅ People willing to manually confirm signals
Who Is It NOT For?
- ❌ People who rely on backtest results to make decisions
- ❌ Players in single-direction trending markets
- ❌ People who need frequent trading (few signals)
- ❌ People who can't accept 30% drawdown
My Advice
- For learning only: This strategy's greatest value is learning peak-valley detection algorithms
- Use as auxiliary: Use divergence signals as auxiliary, not as the sole basis
- Reduce stop-loss: 30% is really too big, change to 10-15%
- Paper trading test: Run at least 2 weeks of paper trading before live, compare differences
IX. In What Markets Can This Strategy Make Money?
9.1 Core Logic: Finding Reversal Points
RaposaDivergenceV1 is a pure divergence strategy. About 200+ lines of code, mainly relies on scipy's argrelextrema to find peaks and valleys.
Its money-making philosophy: Enter when price and indicator "disagree."
- Bullish divergence: Price still falling, but RSI says "can't fall anymore"
- Bearish divergence: Price still rising, but RSI says "can't rise anymore"
9.2 Performance in Different Markets (Plain English Version)
| Market Type | Performance Rating | Plain English Explanation |
|---|---|---|
| 📈 Sustained uptrend | ⭐☆☆☆☆ | Bearish divergence keeps appearing, price keeps rising, stopped out all the way |
| 📉 Sustained downtrend | ⭐☆☆☆☆ | Bullish divergence keeps appearing, price keeps falling, stopped out all the way |
| 🔄 Oscillating transition | ⭐⭐⭐⭐⭐ | Home field! Divergence is designed for this |
| 🔄 Oscillating no-transition | ⭐⭐⭐☆☆ | Many signals but might not be accurate |
One-sentence summary: Divergence strategies only work during trend transitions; single-direction trends will slap you in the face.
X. Want to Run This Strategy? Check These Configurations First
10.1 Trading Pair Configuration
| Configuration Item | Recommended Value | Comment |
|---|---|---|
| Number of pairs | 10-20 | Few signals, need more pairs |
| Volatility | Medium | Too stable = no divergence, too volatile = too many false signals |
| Timeframe | 5 minutes | Default setting |
10.2 Configuration File Key Settings
# config.json key configurations
"timeframe": "5m",
"startup_candle_count": 40, # Warmup needs 40 candles
"trailing_stop": true,
"trailing_stop_positive": 0.01,
"trailing_stop_positive_offset": 0.02
10.3 Hardware Requirements (Important!)
This strategy has moderate computational load, scipy's peak-valley detection isn't too heavy:
| Number of Pairs | Minimum Memory | Recommended Memory | Experience |
|---|---|---|---|
| 1-10 pairs | 2GB | 4GB | Smooth |
| 10-50 pairs | 4GB | 8GB | Normal |
| 50+ pairs | 8GB | 16GB | Slightly laggy |
10.4 Backtest vs. Live Trading
This is key!
Backtest might show: 70% win rate, 300% return
Live might show: 40% win rate, 50% return
Why? Because argrelextrema "sees the future."
Recommended Process:
- Take backtest results with a grain of salt, multiply by 0.5 for a more realistic estimate
- Run paper trading for at least 2 weeks, compare signal lag
- Test with small capital live, verify actual performance
- Manually confirm divergence signals before entering
XI. Bonus: The Strategy Author's "Little Secrets"
Looking carefully at the code, you'll find some interesting things:
-
Author roasts their own sell signal:
sell signal seems like garbage"This sell signal is trash, don't count on it"
-
Warning about future function:
argrelextrema might have look-ahead bias"Backtest looks good but isn't accurate, I already told you"
-
Parameter range design: order and K value ranges are both 1-32, but defaults are 5 and 2
"Defaults are good enough, but you can adjust"
XII. Final Words
One-Sentence Review
"An honest strategy — the author themselves said the sell signal is garbage and backtest is unreliable. Good for learning divergence algorithms, use with caution in live trading."
Who Is It For?
- ✅ Programmers wanting to learn divergence detection algorithms
- ✅ Players in oscillating transition markets
- ✅ People who can accept backtest ≠ live trading
- ✅ People willing to manually confirm signals
Who Is It NOT For?
- ❌ People who rely on backtests to make decisions
- ❌ Players in single-direction trending markets
- ❌ People who need high-frequency trading
- ❌ People who can't accept 30% drawdown
Manual Trading Recommendations
If you want to use this strategy's signals manually:
- Learn to identify divergence patterns (price and RSI moving in opposite directions)
- Wait for peak-valley confirmation before entering, don't rush to buy the dip
- Confirm with other indicators (like MACD, volume)
- Set smaller stop-loss (10-15%), don't copy the strategy's 30%
XIII. ⚠️ Risk Emphasis (Must Read)
Backtest Is Beautiful, Live Trading Needs Caution
RaposaDivergenceV1's historical backtest performance might be very good — but there's a big pitfall:
argrelextrema "sees the future" to confirm peak-valley points, but live trading can't do that.
Simply put: Backtest has x-ray vision, live trading doesn't.
Look-Ahead Bias
What is a future function?
During backtest:
Candle #100 is confirmed as a low point because candles #101, #102, #103 are all higher
During live trading:
Candle #100 just closed, you don't know what #101, #102, #103 will be
Consequences:
- Backtest signals "precisely" appear at the lowest point
- Live signals need to wait several candles before confirmation
- Missing the best entry timing
My Advice (Real Talk)
1. Treat this strategy as learning material, don't count on it to make money
2. If you must use it, combine with other indicators for manual confirmation
3. Change stop-loss to 10-15%, 30% is too big
4. Paper trading test, compare differences between backtest and live
5. Use divergence signals as auxiliary, not as the sole basis
Remember: Divergence strategies are accurate during trend transitions, but will get slapped repeatedly in single-direction trends. Test with small positions, staying alive is most important! 🙏