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MACD Divergence

MACD Divergence looks for disagreement between price action and the MACD indicator. Higher highs in price but lower highs in MACD suggest weakening momentum (bearish divergence), while lower lows in price and higher MACD lows hint at bullish reversal.

Testing indicates an average annual return of about 70%. It performs best in the stocks market.

After detecting divergence, the system waits for MACD to cross its signal line before entering. The trade is closed if MACD crosses back or the stop-loss triggers.

Details

  • Entry Criteria: Bullish or bearish divergence plus MACD crossing signal line.
  • Long/Short: Both directions.
  • Exit Criteria: MACD crosses opposite direction or stop.
  • Stops: Yes.
  • Default Values:
    • FastMacdPeriod = 12
    • SlowMacdPeriod = 26
    • SignalPeriod = 9
    • DivergencePeriod = 5
    • CandleType = TimeSpan.FromMinutes(15)
    • StopLossPercent = 2.0m
  • Filters:
    • Category: Divergence
    • Direction: Both
    • Indicators: MACD
    • Stops: Yes
    • Complexity: Intermediate
    • Timeframe: Intraday
    • Seasonality: No
    • Neural Networks: No
    • Divergence: Yes
    • 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 Divergence strategy.
/// Detects divergences between price and MACD for reversal signals.
/// Bullish: price falling but MACD rising.
/// Bearish: price rising but MACD falling.
/// </summary>
public class MacdDivergenceStrategy : Strategy
{
	private readonly StrategyParam<DataType> _candleType;
	private readonly StrategyParam<int> _cooldownBars;

	private decimal _prevPrice;
	private decimal _prevMacd;
	private int _cooldown;

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

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

	/// <summary>
	/// Constructor.
	/// </summary>
	public MacdDivergenceStrategy()
	{
		_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.Value)];
	}

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

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

		_prevPrice = 0;
		_prevMacd = 0;
		_cooldown = 0;

		var macd = new MovingAverageConvergenceDivergenceSignal();

		var subscription = SubscribeCandles(_candleType.Value);
		subscription
			.BindEx(macd, ProcessCandle)
			.Start();

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

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

		if (!macdValue.IsFormed)
			return;

		var macdTyped = (MovingAverageConvergenceDivergenceSignalValue)macdValue;

		if (macdTyped.Macd is not decimal macdLine || macdTyped.Signal is not decimal signal)
			return;

		if (_prevPrice == 0)
		{
			_prevPrice = candle.ClosePrice;
			_prevMacd = macdLine;
			return;
		}

		if (_cooldown > 0)
		{
			_cooldown--;
			_prevPrice = candle.ClosePrice;
			_prevMacd = macdLine;
			return;
		}

		// Bullish divergence: price down but MACD up
		var bullishDiv = candle.ClosePrice < _prevPrice && macdLine > _prevMacd;
		// Bearish divergence: price up but MACD down
		var bearishDiv = candle.ClosePrice > _prevPrice && macdLine < _prevMacd;

		if (Position == 0 && bullishDiv && macdLine > signal)
		{
			BuyMarket();
			_cooldown = CooldownBars;
		}
		else if (Position == 0 && bearishDiv && macdLine < signal)
		{
			SellMarket();
			_cooldown = CooldownBars;
		}
		else if (Position > 0 && macdLine < signal)
		{
			SellMarket();
			_cooldown = CooldownBars;
		}
		else if (Position < 0 && macdLine > signal)
		{
			BuyMarket();
			_cooldown = CooldownBars;
		}

		_prevPrice = candle.ClosePrice;
		_prevMacd = macdLine;
	}
}