Trade Signals Based on Dark Cloud Cover/Piercing Line + Stochastic – expert for MetaTrader 5

The MQL5 Wizard allows creating ready-made Expert Advisors based on the Standard library classes delivered together with the client terminal (see Creating Ready-Made Expert Advisors in MQL5 Wizard for the details). It allows to check your trade ideas quickly, all you need is to create your own trading signals class. The structure of this class and example can be found in the article MQL5 Wizard: How to Create a Module of Trading Signals.

The generic idea is the following: the class of trading signals is derived from  CExpertSignal, the next, it’s necessary to override the LongCondition() and ShortCondition() virtual methods with your own methods.

There is a book “Strategies of best traders” (in Russian), there are many trading strategies are considered there, we will focus on reversal candlestick patterns, confirmed by StochasticCCIMFI and RSI oscillators.

The best way is to create the separate class, derived from CExpertSignal for checking of formation of candlestick patterns. For confirmation of trade signals, generated by candlestick patterns, it’s sufficient to write the class, derived from CCandlePattern and add the necessary features (for example, confirmation by oscillators) there.

Here we will consider the signals, based “Dark Cloud Cover/Piercing Line” reversal candlestick pattern, confirmed by Stochastic indicator. The module of trade signals is based on the CCandlePattern class, it’s simple example of its use for creation of trade signals with candlestick patterns.

1.”Dark Cloud Cover” and “Piercing Line” reversal candlestick patterns

1.1.Dark Cloud Cover

It’s a bearish candlestick reversal that occurs at the end of uptrend. A long white candlestick is formed on the first day and a gap up is created on the second day. However, the second day closes below the midpoint of the first day.

Fig. 1. "Dark Cloud Cover" candlestick pattern

Fig. 1. “Dark Cloud Cover” candlestick pattern

The recognition of “Dark Cloud Cover” pattern is implemented in CheckPatternDarkCloudCover() method of CCandlePattern class:





The CheckCandlestickPattern(CANDLE_PATTERN_DARK_CLOUD_COVER) method of CCandlePattern class is used to check formation of “Dark Cloud Cover” candlestick pattern.

1.2. Piercing Line

The gap down on the second day perpetuates the downtrend. However, the second day’s close is above the midpoint of the first day’s body. This suggests to the bears that a bottom could be forming. This price action is not nearly as discernable using bar charts as it is with candlestick charts. The more penetration of the close on the second day to the first  day’s body, the more probable the reversal signal will succeed.

Figure 2. "Piercing Line" candlestick pattern

Figure 2. “Piercing Line” candlestick pattern

The recognition of “Piercing Line” pattern is implemented in CheckPatternPiercingLine() method of CCandlePattern class:





The CheckCandlestickPattern(CANDLE_PATTERN_PIERCING_LINE) method of CCandlePattern class is used to check formation of “Piercing Line” candlestick pattern.

2. Trade signals, confirmed by Stochastic indicator

The trading signals to open long or short position must be confirmed by Stochastic oscillator. The signal %D line must be greater/lower then corresponding critical level (30 or 70).

The closing of opened position depends on the values of %D indicator. It can be done in 2 cases: 

  1. if %D line has reached the opposite critical level (80 for long position and 20 for short position)
  2. if the reverse signal isn’t confirmed (when %D line reaches the following levels: 20 for long position and 80 for short position)
Figure 3. "Dark Cloud Cover" pattern, confirmed by Stochastic indicator

Figure 3. “Dark Cloud Cover” pattern, confirmed by Stochastic indicator

2.1. Open long position/Close short position

  1. The formation of “Piercing Line” pattern must be confirmed by Stochastic indicator: StochSignal(1)<30 (the value of the signal line of Stochastic indicator of the last completed bar must be less than 30).
  2. The short position must be closed if the signal line of  Stochastic indicator has crossed upward the 20 or 80 levels.




2.2. Open short position/Close long position

  1. The formation of “Dark Cloud Cover” pattern must be confirmed by Stochastic indicator: StochSignal(1)>70 (the value of the signal line of Stochastic indicator of the last completed bar must be greater than 70).
  2. The long position must be closed if the signal line of  Stochastic indicator has crossed downward the 80 or 20 levels.




2.3. Creating Expert Advisor using MQL5 Wizard

The CDC_PL_Stoch class isn’t included in the Standard Library classes, to use it, it’s necessary to download the adc_pl_stoch.mqh file (see attachments) and save it to the client_terminal_data\folder\MQL5\Include\Expert\Signal\MySignals. The same should be done with the candlepatterns.mqh file. You can use it in MQL5 Wizard after restart of the MetaEditor.

To create an Expert Advisor launch MQL5 Wizard:

Fig. 4. Creating Expert Advisor using MQL5 Wizard

Fig. 4. Creating Expert Advisor using MQL5 Wizard

Let’s specify the name of the Expert Advisor:

Fig. 5. General properties of the Expert Advisor

Fig. 5. General properties of the Expert Advisor

After that we need to select the modules of trade signals used.

Fig. 6. Signal properties of the Expert Advisor

Fig. 6. Signal properties of the Expert Advisor

In our case we use only one module of trade signals.

Adding the “Signals based on Dark Cloud Cover/Piercing Line confirmed by Stochastic” module of trading signals:

Fig. 7. Signal properties of the Expert Advisor

Fig. 7. Signal properties of the Expert Advisor

Module of trade signals added:

Fig. 8. Signal properties of the Expert Advisor

Fig. 8. Signal properties of the Expert Advisor

You can select any trailing properties, but we will use “Trailing Stop not used”:

Fig. 9. Trailing properties of the Expert Advisor

Fig. 9. Trailing properties of the Expert Advisor

Concerning the money management properties, we will use “Trading with fixed trade volume”:

Fig. 10. Money management properties of the Expert Advisor

Fig. 10. Money management properties of the Expert Advisor

By pressing the “Finish” button, we will get the code of the generated Expert Advisor, located in Expert_ADC_PL_Stoch.mq5, it will be saved in terminal_data_folder\MQL5\Experts\.

The default input parameters of the generated Expert Advisor:





must be replaced to: 





The Signal_ThresholdOpen/Signal_ThresholdClose input parameters allow to specify threshold levels for open and close of positions.

In code of the LongCondition() and ShortCondition() methods of the trade signals class we have specified the fixed values of the threshold:

  • Open position: 80;
  • Close position: 40.

The Expert Advisor, generated by MQL5 Wizard open and close position using the “votes” from the modules of trade signals. The vote of the main module (as container, it consist of all the modules added) is also used, but its LongCondition() and ShortCondition() methods always return 0.

The vote results of the main module is also used in “votes” averaging. In our case we have:  main module + 1 module of trade signals, so we need to take this fact into account when setting of the threshold values. Because of this fact the ThresholdOpen and ThresholdClose must be set as 40=(0+80)/2 and 20=(0+40)/2.

The values of  Signal_StopLevel and Signal_TakeLevel input parameters is set to 0, it means that closing of the positions will be done only when closing conditions will be true.

2.4. History backtesting results

Let’s consider backtesting of the Expert Advisor on historical data (EURUSD H1, testing period: 2010.01.01-2011.02.02, PeriodK=9, PeriodD=5, PeriodSlow=20, MA_period=27).

In creation of Expert Advisor we used the fixed volume (Trading Fixed Lot, 0.1), Trailing Stop algorithm is not used (Trailing not used).

Fig. 11. Testing results of the Expert Advisor, based on Dark Cloud Cover/Piercing Line + Stochastic"

Fig. 11. Testing results of the Expert Advisor, based on Dark Cloud Cover/Piercing Line + Stochastic”

The best set of input parameters can be found using the Strategy Tester of MetaTrader 5 client terminal.

The code of the Expert Advisor, created by MQL5 Wizard is attached in expert_adc_pl_stoch.mq5.