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MACD Histogram Reversal Strategy

The MACD histogram represents the difference between the MACD line and its signal line. Crosses above or below zero often mark shifts in momentum. This strategy trades those zero-line crosses and manages risk with a percent stop.

Testing indicates an average annual return of about 160%. It performs best in the forex market.

On each candle the MACD histogram is computed. When it transitions from negative to positive, a long position is opened. A flip from positive to negative triggers a short sale. Because the strategy only looks for the zero crossover, trades are straightforward and typically short term.

Stops are used to contain losses if momentum fails to continue in the expected direction.

Details

  • Entry Criteria: MACD histogram crosses zero.
  • Long/Short: Both.
  • Exit Criteria: Stop-loss.
  • Stops: Yes, percentage based.
  • Default Values:
    • FastPeriod = 12
    • SlowPeriod = 26
    • SignalPeriod = 9
    • StopLoss = 2%
    • CandleType = 15 minute
  • Filters:
    • Category: Momentum
    • Direction: Both
    • Indicators: MACD
    • Stops: Yes
    • Complexity: Basic
    • Timeframe: Intraday
    • Seasonality: No
    • Neural networks: No
    • Divergence: No
    • Risk level: Medium
using System;
using System.Collections.Generic;

using Ecng.Common;

using StockSharp.Algo.Indicators;
using StockSharp.Algo.Strategies;
using StockSharp.BusinessEntities;
using StockSharp.Messages;

namespace StockSharp.Samples.Strategies;

/// <summary>
/// MACD Histogram Reversal strategy.
/// Enters long when MACD histogram (MACD - Signal) crosses above zero.
/// Enters short when MACD histogram crosses below zero.
/// Uses cooldown to control trade frequency.
/// </summary>
public class MacdHistogramReversalStrategy : Strategy
{
	private readonly StrategyParam<int> _fastPeriod;
	private readonly StrategyParam<int> _slowPeriod;
	private readonly StrategyParam<int> _signalPeriod;
	private readonly StrategyParam<DataType> _candleType;
	private readonly StrategyParam<int> _cooldownBars;

	private decimal? _prevHistogram;
	private int _cooldown;

	/// <summary>
	/// Fast EMA period.
	/// </summary>
	public int FastPeriod
	{
		get => _fastPeriod.Value;
		set => _fastPeriod.Value = value;
	}

	/// <summary>
	/// Slow EMA period.
	/// </summary>
	public int SlowPeriod
	{
		get => _slowPeriod.Value;
		set => _slowPeriod.Value = value;
	}

	/// <summary>
	/// Signal line period.
	/// </summary>
	public int SignalPeriod
	{
		get => _signalPeriod.Value;
		set => _signalPeriod.Value = value;
	}

	/// <summary>
	/// Candle type.
	/// </summary>
	public DataType CandleType
	{
		get => _candleType.Value;
		set => _candleType.Value = value;
	}

	/// <summary>
	/// Cooldown bars.
	/// </summary>
	public int CooldownBars
	{
		get => _cooldownBars.Value;
		set => _cooldownBars.Value = value;
	}

	/// <summary>
	/// Constructor.
	/// </summary>
	public MacdHistogramReversalStrategy()
	{
		_fastPeriod = Param(nameof(FastPeriod), 12)
			.SetRange(8, 16)
			.SetDisplay("Fast Period", "Fast EMA period for MACD", "MACD");

		_slowPeriod = Param(nameof(SlowPeriod), 26)
			.SetRange(20, 30)
			.SetDisplay("Slow Period", "Slow EMA period for MACD", "MACD");

		_signalPeriod = Param(nameof(SignalPeriod), 9)
			.SetRange(7, 13)
			.SetDisplay("Signal Period", "Signal line period", "MACD");

		_candleType = Param(nameof(CandleType), TimeSpan.FromMinutes(1).TimeFrame())
			.SetDisplay("Candle Type", "Type of candles to use", "General");

		_cooldownBars = Param(nameof(CooldownBars), 500)
			.SetRange(1, 1000)
			.SetDisplay("Cooldown Bars", "Bars to wait between trades", "General");
	}

	/// <inheritdoc />
	public override IEnumerable<(Security sec, DataType dt)> GetWorkingSecurities()
	{
		return [(Security, CandleType)];
	}

	/// <inheritdoc />
	protected override void OnReseted()
	{
		base.OnReseted();
		_prevHistogram = null;
		_cooldown = default;
	}

	/// <inheritdoc />
	protected override void OnStarted2(DateTime time)
	{
		base.OnStarted2(time);

		_prevHistogram = null;
		_cooldown = 0;

		var macdHist = new MovingAverageConvergenceDivergenceHistogram
		{
			Macd =
			{
				ShortMa = { Length = FastPeriod },
				LongMa = { Length = SlowPeriod },
			},
			SignalMa = { Length = SignalPeriod }
		};

		var subscription = SubscribeCandles(CandleType);
		subscription
			.BindEx(macdHist, ProcessCandle)
			.Start();

		var area = CreateChartArea();
		if (area != null)
		{
			DrawCandles(area, subscription);
			DrawIndicator(area, macdHist);
			DrawOwnTrades(area);
		}
	}

	private void ProcessCandle(ICandleMessage candle, IIndicatorValue macdIv)
	{
		if (candle.State != CandleStates.Finished)
			return;

		if (!macdIv.IsFormed)
			return;

		var mv = (IMacdHistogramValue)macdIv;

		if (mv.Macd is not decimal macdVal || mv.Signal is not decimal signalVal)
			return;

		var histogram = macdVal - signalVal;

		if (_prevHistogram == null)
		{
			_prevHistogram = histogram;
			return;
		}

		if (_cooldown > 0)
		{
			_cooldown--;
			_prevHistogram = histogram;
			return;
		}

		var crossedAboveZero = _prevHistogram < 0 && histogram >= 0;
		var crossedBelowZero = _prevHistogram > 0 && histogram <= 0;

		if (Position == 0 && crossedAboveZero)
		{
			BuyMarket();
			_cooldown = CooldownBars;
		}
		else if (Position == 0 && crossedBelowZero)
		{
			SellMarket();
			_cooldown = CooldownBars;
		}
		else if (Position > 0 && crossedBelowZero)
		{
			SellMarket();
			_cooldown = CooldownBars;
		}
		else if (Position < 0 && crossedAboveZero)
		{
			BuyMarket();
			_cooldown = CooldownBars;
		}

		_prevHistogram = histogram;
	}
}