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Ichimoku Cloud Width Mean Reversion

The Ichimoku Cloud Width Mean Reversion strategy focuses on extreme readings of the Ichimoku to exploit reversion. Wide departures from the normal level rarely last.

Testing indicates an average annual return of about 124%. It performs best in the forex market.

Trades trigger when the indicator swings far from its mean and then begins to reverse. Both long and short setups include a protective stop.

Suited for swing traders expecting oscillations, the strategy closes out once the Ichimoku returns toward balance. Starting parameter TenkanPeriod = 9.

Details

  • Entry Criteria: Indicator crosses back toward mean.
  • Long/Short: Both directions.
  • Exit Criteria: Indicator reverts to average.
  • Stops: Yes.
  • Default Values:
    • TenkanPeriod = 9
    • KijunPeriod = 26
    • SenkouSpanBPeriod = 52
    • LookbackPeriod = 20
    • DeviationMultiplier = 2.0m
    • CandleType = TimeSpan.FromMinutes(5)
  • Filters:
    • Category: Mean Reversion
    • Direction: Both
    • Indicators: Ichimoku
    • Stops: Yes
    • Complexity: Intermediate
    • Timeframe: Short-term
    • 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>
/// Ichimoku cloud width mean reversion strategy.
/// Trades contractions and expansions of the Ichimoku cloud width around its recent average.
/// </summary>
public class IchimokuCloudWidthMeanReversionStrategy : Strategy
{
	private readonly StrategyParam<int> _tenkanPeriod;
	private readonly StrategyParam<int> _kijunPeriod;
	private readonly StrategyParam<int> _senkouSpanBPeriod;
	private readonly StrategyParam<int> _lookbackPeriod;
	private readonly StrategyParam<decimal> _deviationMultiplier;
	private readonly StrategyParam<decimal> _stopLossPercent;
	private readonly StrategyParam<int> _cooldownBars;
	private readonly StrategyParam<DataType> _candleType;

	private Ichimoku _ichimoku;
	private decimal[] _cloudWidthHistory;
	private int _currentIndex;
	private int _filledCount;
	private int _cooldown;

	/// <summary>
	/// Tenkan-sen period.
	/// </summary>
	public int TenkanPeriod
	{
		get => _tenkanPeriod.Value;
		set => _tenkanPeriod.Value = value;
	}

	/// <summary>
	/// Kijun-sen period.
	/// </summary>
	public int KijunPeriod
	{
		get => _kijunPeriod.Value;
		set => _kijunPeriod.Value = value;
	}

	/// <summary>
	/// Senkou Span B period.
	/// </summary>
	public int SenkouSpanBPeriod
	{
		get => _senkouSpanBPeriod.Value;
		set => _senkouSpanBPeriod.Value = value;
	}

	/// <summary>
	/// Lookback period for cloud width statistics.
	/// </summary>
	public int LookbackPeriod
	{
		get => _lookbackPeriod.Value;
		set => _lookbackPeriod.Value = value;
	}

	/// <summary>
	/// Deviation multiplier for mean reversion detection.
	/// </summary>
	public decimal DeviationMultiplier
	{
		get => _deviationMultiplier.Value;
		set => _deviationMultiplier.Value = value;
	}

	/// <summary>
	/// Stop loss percentage.
	/// </summary>
	public decimal StopLossPercent
	{
		get => _stopLossPercent.Value;
		set => _stopLossPercent.Value = value;
	}

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

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

	/// <summary>
	/// Initializes a new instance of <see cref="IchimokuCloudWidthMeanReversionStrategy"/>.
	/// </summary>
	public IchimokuCloudWidthMeanReversionStrategy()
	{
		_tenkanPeriod = Param(nameof(TenkanPeriod), 9)
			.SetGreaterThanZero()
			.SetDisplay("Tenkan Period", "Tenkan-sen period", "Ichimoku")
			.SetOptimize(5, 20, 1);

		_kijunPeriod = Param(nameof(KijunPeriod), 26)
			.SetGreaterThanZero()
			.SetDisplay("Kijun Period", "Kijun-sen period", "Ichimoku")
			.SetOptimize(20, 40, 2);

		_senkouSpanBPeriod = Param(nameof(SenkouSpanBPeriod), 52)
			.SetGreaterThanZero()
			.SetDisplay("Senkou Span B Period", "Senkou Span B period", "Ichimoku")
			.SetOptimize(40, 80, 4);

		_lookbackPeriod = Param(nameof(LookbackPeriod), 20)
			.SetGreaterThanZero()
			.SetDisplay("Lookback Period", "Lookback period for cloud width statistics", "Strategy Parameters")
			.SetOptimize(10, 50, 5);

		_deviationMultiplier = Param(nameof(DeviationMultiplier), 1.5m)
			.SetGreaterThanZero()
			.SetDisplay("Deviation Multiplier", "Deviation multiplier for mean reversion detection", "Strategy Parameters")
			.SetOptimize(1m, 3m, 0.5m);

		_stopLossPercent = Param(nameof(StopLossPercent), 2m)
			.SetGreaterThanZero()
			.SetDisplay("Stop Loss %", "Stop loss percentage", "Risk Management");

		_cooldownBars = Param(nameof(CooldownBars), 1200)
			.SetRange(1, 5000)
			.SetDisplay("Cooldown Bars", "Bars to wait between orders", "Risk Management");

		_candleType = Param(nameof(CandleType), TimeSpan.FromMinutes(5).TimeFrame())
			.SetDisplay("Candle Type", "Candle type for strategy", "General");
	}

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

	/// <inheritdoc />
	protected override void OnReseted()
	{
		base.OnReseted();
		_ichimoku = null;
		_currentIndex = default;
		_filledCount = default;
		_cooldown = default;
		_cloudWidthHistory = new decimal[LookbackPeriod];
	}

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

		_ichimoku = new Ichimoku
		{
			Tenkan = { Length = TenkanPeriod },
			Kijun = { Length = KijunPeriod },
			SenkouB = { Length = SenkouSpanBPeriod },
		};

		_cloudWidthHistory = new decimal[LookbackPeriod];
		_currentIndex = 0;
		_filledCount = 0;
		_cooldown = 0;

		var subscription = SubscribeCandles(CandleType);
		subscription
			.BindEx(_ichimoku, ProcessIchimoku)
			.Start();

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

		StartProtection(new(), new Unit(StopLossPercent, UnitTypes.Percent));
	}

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

		if (!_ichimoku.IsFormed)
			return;

		var typedValue = (IchimokuValue)ichimokuValue;
		if (typedValue.SenkouA is not decimal senkouA ||
			typedValue.SenkouB is not decimal senkouB)
			return;

		var cloudWidth = Math.Abs(senkouA - senkouB);

		_cloudWidthHistory[_currentIndex] = cloudWidth;
		_currentIndex = (_currentIndex + 1) % LookbackPeriod;

		if (_filledCount < LookbackPeriod)
			_filledCount++;

		if (_filledCount < LookbackPeriod)
			return;

		var avgWidth = 0m;
		var sumSq = 0m;

		for (var i = 0; i < LookbackPeriod; i++)
			avgWidth += _cloudWidthHistory[i];

		avgWidth /= LookbackPeriod;

		for (var i = 0; i < LookbackPeriod; i++)
		{
			var diff = _cloudWidthHistory[i] - avgWidth;
			sumSq += diff * diff;
		}

		var stdWidth = (decimal)Math.Sqrt((double)(sumSq / LookbackPeriod));

		if (!IsFormedAndOnlineAndAllowTrading())
			return;

		if (_cooldown > 0)
		{
			_cooldown--;
			return;
		}

		var narrowThreshold = avgWidth - stdWidth * DeviationMultiplier;
		var wideThreshold = avgWidth + stdWidth * DeviationMultiplier;
		var upperCloud = Math.Max(senkouA, senkouB);
		var lowerCloud = Math.Min(senkouA, senkouB);
		var priceAboveCloud = candle.ClosePrice > upperCloud;
		var priceBelowCloud = candle.ClosePrice < lowerCloud;

		if (Position == 0)
		{
			if (cloudWidth < narrowThreshold)
			{
				if (priceAboveCloud)
				{
					BuyMarket();
					_cooldown = CooldownBars;
				}
				else if (priceBelowCloud)
				{
					SellMarket();
					_cooldown = CooldownBars;
				}
			}
			else if (cloudWidth > wideThreshold)
			{
				if (priceBelowCloud)
				{
					SellMarket();
					_cooldown = CooldownBars;
				}
				else if (priceAboveCloud)
				{
					BuyMarket();
					_cooldown = CooldownBars;
				}
			}
		}
		else if (Position > 0 && cloudWidth >= avgWidth)
		{
			SellMarket(Math.Abs(Position));
			_cooldown = CooldownBars;
		}
		else if (Position < 0 && cloudWidth <= avgWidth)
		{
			BuyMarket(Math.Abs(Position));
			_cooldown = CooldownBars;
		}
	}
}