MQL5 Wizard - Trading Signals Based on Dark Cloud Cover/Piercing Line + MFI - MetaTrader 5 Expert
There is the book "Strategies of the Best Traders " (in Russian), where many trading strategies are considered, we will focus on reversal candlestick patterns, represented by Stochastic , CCI , Micro Institutions and RSI oscillators.
The best way is to create a separate class derived from Expert Signal for checking the formation of candlestick patterns. For the confirmation of trading signals generated by candlestick patterns, it is enough to write a class derived from CCandlePattern and add in it the necessary functionality (for example, confirmation by oscillator).
Here we will consider signals based on the “Dark Cloud Cover/Piercing Line” reversal candlestick pattern and confirm the Market Facilitation Index (MFI) indicator in the following manner. The trading signals module is based on the CC candle pattern class, which is a simple example of creating trading signals using candlestick patterns.
1. “Dark Cloud Cover” and “Piercing Line” Reversal Candlestick Patterns
1.1. Dark clouds cover the sky
This is a bearish candlestick reversal that occurs at the end of an uptrend. A long white candlestick is formed on the first day, and a gap is formed on the second day. However, the second day's closing price was below the midpoint of the first day.
Figure 1. “Dark Cloud Cover” Candlestick Pattern
The recognition of the "Dark Cloud Cover" pattern is implemented in the CheckPatternDarkCloudCover() method of the CC candle pattern class:
//+------------------------------------------------------------------+ //|Check the formation of the "Dark Cloud Cover" candlestick pattern | //+------------------------------------------------------------------+ BooleanCCandlePattern ::CheckPatternDarkCloudCover() { //--- Dark Cloud Cover if ((Close( 2 )-Open( 2 ))>Average Body( 1 )) && //(Long White) (Close( 1 )<Close( 2 )) && // (Close( 1 )>Open( 2 )) && //(Close within the previous body) (Open Close( 2 )>Close Average( 1 )) && //(Uptrend) (Open( 1 )>High( 2 ))) //(opening new high) returns ( true ); //--- returns ( false ); }
CheckCandlestickPattern(CANDLE_PATTERN_DARK_CLOUD_COVER) method CC Candlestick Pattern class is used to check the formation of "dark cloud cover" candlestick pattern.
1.2.Punch line
The second day's lower gap continued the downward trend. However, the second day's close was above the midpoint of the first day's body. This indicates to bears that a bottom may be forming. This price movement cannot be discerned as clearly with a bar chart as with a candlestick chart. The more the second day's close penetrates the first day's body, the more likely the reversal signal will be successful.
Figure 2. “Piercing Line” Candlestick Pattern
The recognition of the "Piercing Line" pattern is implemented in the CheckPatternPiercingLine() method of the CC candle pattern class:
//+------------------------------------------------------------------+ //|Check the formation of the "Piercing Line" candlestick pattern | //+------------------------------------------------------------------+ BooleanCCandlePattern ::CheckPatternPiercingLine() { //--- puncture line if ((close( 1 )-open( 1 )>average body( 1 )) && //(long white) (open( 2 )-close( 2 )>average body( 1 )) && //(long black) (close( 1 )>close( 2 )) && // (close( 1 )<open( 2 )) && //(close inside previous body) (mid-open close( 2 )<Closing Average( 2 )) && //(Downtrend) (Open( 1 )<Low( 2 ))) //(Open lower than previous low) return ( true ); //--- return ( false ); }
CheckCandlestickPattern(CANDLE_PATTERN_PIERCING_LINE) method CC Candlestick Pattern class is used to check the formation of "Piercing Line" candlestick pattern.
2. Trading signals confirmed by the MFI indicator
The closing of an open position depends on the value of the MFI indicator. This can be done in two situations:
Figure 3. “Dark Cloud Cover” pattern confirmed by MFI indicator
2.1. Open long position/close short position
The formation of the "Morning Star" pattern must be determined by the Micro Financial Institutions indicator: MFi(1)<40 (the MFI indicator value of the last completed bar must be less than 40).
Short positions must be closed if the MFI indicator crosses above key levels (70 or 30).
//+------------------------------------------------------------------+ //|Check the conditions for entering and exiting the market | //| 1) Enter the market (open long position, result = 80) | //| 2) Market Exit (Close Position, Result=40) | //+------------------------------------------------------------------+ Integer CDC_PL_MFI::LongCondition() { Integer result = 0 ; //--- idx can be used to determine the Expert Advisor working mode //--- idx=0 - in this case the EA checks the trading conditions on every price move //--- idx=1 - in this case the EA only checks the trading status of the news bar integer idx =StartIndex(); //--- checks the conditions for opening a long position //--- Piercing line pattern is formed and MFI < 40 if (check candlestick pattern (CANDLE_PATTERN_PIERCING_LINE) && (MFI( 1 ) < 40 )) Result = 80 ; //--- check closing conditions //--- Signal lines for overbought/oversold levels are crossed (30 up, 70 up) if (((MFI( 1 )> 30 ) && (MFI( 2 )< 30 )) || ((MFI( 1 )> 70 ) && (MFI( 2 )< 70 ))) result = 40 ; //--- return result return (result); }
2.2. Open short position/close long position
The formation of the "dark cloud cover" pattern must be determined by the Micro Financial Institutions indicator: MFI(1)>60 (the MFI indicator value of the final completed bar must be greater than 60).
Long positions must be closed if the MFI indicator crosses above key levels (70 or 30).
//+------------------------------------------------------------------+ //|Check the conditions for entering and exiting the market | //| 1) Enter the market (short position, result = 80) | //| 2) Market Exit (Close Position, Result=40) | //+------------------------------------------------------------------+ Integer CDC_PL_MFI::ShortCondition() { Integer result = 0 ; //--- idx can be used to determine the Expert Advisor working mode //--- idx=0 - in this case the EA checks the trading conditions on every price move //--- idx=1 - in this case the EA only checks the trading status of the news bar integer idx =StartIndex(); //--- checks the conditions for opening a short position //--- Dark cloud cover pattern is formed and MFI>60 if (check candlestick pattern (CANDLE_PATTERN_DARK_CLOUD_COVER) && (MFI( 1 )> 60 )) Result = 80 ; //--- check closing conditions //--- Signal lines for overbought/oversold levels are crossed (70 up, 30 down) if (((MFI( 1 )> 70 ) && (MFI( 2 )< 70 )) || ((MFI( 1 )< 30 ) && (MFI( 2 )> 30 ))) result = 40 ; //--- return result return (result); }
2.3. Use the MQL5 Wizard to create an Expert Advisor
The CDC_PL_MFI class is not included in the standard library classes, to use it you need to download the adc_pl_mfi.mqh file (see attachment) and save it to client_terminal_data\folder\MQL5\Include\Expert\Signal\MySignals. The same operation should be performed for the candlepatterns.mqh file. After restarting MetaEditor, you can use it in the MQL5 Wizard.
Create Expert Advisor Launch MQL5 Wizard :
Figure 4. Creating an Expert Advisor using the MQL5 Wizard
Let's specify the name of the Expert Advisor:
Figure 5. General properties of EA trading
After that we need to choose the trading signal module to use.
Figure 6. Signal properties of EA trading
In our case we use only one trading signals module.
Figure 7. Signal properties of EA trading
Added trading signals module:
Figure 8. Signal properties of EA trading
You can choose any trailing attribute, but we will use "Unused Trailing Stop":
Figure 9. Tracking properties of Expert Advisor
Regarding the money management properties, we will use "Fixed Volume Trading":
Figure 10. Money management attributes of EA trading
By pressing the "Finish" button we will get the code of the generated Expert Advisor in Expert_ADC_PL_MFI.mq5, which will be saved in terminal_data_folder\MQL5\Experts\.
Default input parameters of the generated Expert Advisor:
//--- Main signal input Input integer Signal_ThresholdOpen = 10 ; //Open signal threshold[0...100] Input integer Signal_ThresholdClose = 10 ; // Close signal threshold [0...100] Enter double Signal_PriceLevel = 0.0 ; // price level at which to execute the trade Enter double Signal_StopLevel = 50.0 ; // Stop loss level in pips Enter double Signal_TakeLevel = 50.0 ; // Take profit level (in pips)
Must be replaced with:
//--- Main signal input Input integer Signal_ThresholdOpen = 40 ; //Open signal threshold[0...100] Input integer Signal_ThresholdClose = 20 ; // Close signal threshold [0...100] Enter double Signal_PriceLevel = 0.0 ; // price level at which to execute the trade Enter double Signal_StopLevel = 0.0 ; // Stop loss level in points Enter double Signal_TakeLevel = 0.0 ; // Take profit level (in pips)
Signal_ThresholdOpen/Signal_ThresholdClose input parameters allow specifying threshold levels for opening and closing positions.
In the code of the LongCondition() and ShortCondition() methods of the trading signal class, we specify the fixed value of the threshold:
The Expert Advisor generates opening and closing positions by the MQL5 Wizard using "votes" in the Trading Signals module. The vote of the main module (which acts as a container and consists of all added modules) is also used, but its LongCondition() and ShortCondition() methods always return 0.
The voting results from the main module are also used for "voting" averaging. In our case we have: main module + 1 trading signals module, so we need to take this fact into account when setting the thresholds. Therefore, ThresholdOpen and ThresholdClose must be set to 40=(0+80)/2 and 20=(0+40)/2.
The value of the Signal_StopLevel and Signal_TakeLevel input parameters is set to 0, which means that the position will be closed only if the closing conditions are met.
2.4. Historical backtest results
Let us consider the backtesting of EA trading on historical data (EURUSD H1, test period: 2010.01.01-2011.03.16, PeriodMFI=49, MA_period=11).
When creating the EA, we used a fixed trading volume ( fixed lot size for trading , 0.1) and did not use the trailing stop algorithm ( trailing was not used ).
Figure 11. EA trading test results based on dark cloud cover/piercing line + MFI
The best set of input parameters for the Strategy Tester MetaTrader 5 client can be found using the following command.
The code for the Expert Advisor created by the MQL5 Wizard is attached in Expert_adc_pl_mfi.mq5.
Attachment download
📎 acandlepatterns.mqh (20.34 KB)
📎 acdc_pl_mfi.mqh (8.02 KB)
📎 expert_adc_pl_mfi.mq5 (6.63 KB)
Source: MQL5 #299
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