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Stochastic Slope Mean Reversion

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

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 Stochastic returns toward balance. Starting parameter StochPeriod = 14.

Details

  • Entry Criteria: Indicator crosses back toward mean.
  • Long/Short: Both directions.
  • Exit Criteria: Indicator reverts to average.
  • Stops: Yes.
  • Default Values:
    • StochPeriod = 14
    • StochKPeriod = 3
    • StochDPeriod = 3
    • SlopeLookback = 20
    • ThresholdMultiplier = 2m
    • StopLossPercent = 2m
    • CandleType = TimeSpan.FromMinutes(5)
  • Filters:
    • Category: Mean Reversion
    • Direction: Both
    • Indicators: Stochastic
    • 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.Strategies;
using StockSharp.BusinessEntities;
using StockSharp.Messages;

namespace StockSharp.Samples.Strategies;

/// <summary>
/// Stochastic slope mean reversion strategy.
/// Trades reversions from extreme smoothed stochastic slopes and exits when the slope returns to its recent average.
/// </summary>
public class StochasticSlopeMeanReversionStrategy : Strategy
{
	private readonly StrategyParam<int> _stochKPeriod;
	private readonly StrategyParam<int> _stochDPeriod;
	private readonly StrategyParam<int> _slopeLookback;
	private readonly StrategyParam<decimal> _thresholdMultiplier;
	private readonly StrategyParam<decimal> _stopLossPercent;
	private readonly StrategyParam<int> _cooldownBars;
	private readonly StrategyParam<decimal> _longStochLevel;
	private readonly StrategyParam<decimal> _shortStochLevel;
	private readonly StrategyParam<DataType> _candleType;

	private decimal[] _highs;
	private decimal[] _lows;
	private int _priceIndex;
	private int _priceFilled;
	private decimal[] _kValues;
	private int _kIndex;
	private int _kFilled;
	private decimal _previousStochK;
	private decimal[] _slopeHistory;
	private int _slopeIndex;
	private int _slopeFilled;
	private int _cooldown;
	private bool _isInitialized;

	public int StochKPeriod
	{
		get => _stochKPeriod.Value;
		set => _stochKPeriod.Value = value;
	}

	public int StochDPeriod
	{
		get => _stochDPeriod.Value;
		set => _stochDPeriod.Value = value;
	}

	public int SlopeLookback
	{
		get => _slopeLookback.Value;
		set => _slopeLookback.Value = value;
	}

	public decimal ThresholdMultiplier
	{
		get => _thresholdMultiplier.Value;
		set => _thresholdMultiplier.Value = value;
	}

	public decimal StopLossPercent
	{
		get => _stopLossPercent.Value;
		set => _stopLossPercent.Value = value;
	}

	public int CooldownBars
	{
		get => _cooldownBars.Value;
		set => _cooldownBars.Value = value;
	}

	public decimal LongStochLevel
	{
		get => _longStochLevel.Value;
		set => _longStochLevel.Value = value;
	}

	public decimal ShortStochLevel
	{
		get => _shortStochLevel.Value;
		set => _shortStochLevel.Value = value;
	}

	public DataType CandleType
	{
		get => _candleType.Value;
		set => _candleType.Value = value;
	}

	public StochasticSlopeMeanReversionStrategy()
	{
		_stochKPeriod = Param(nameof(StochKPeriod), 14)
			.SetGreaterThanZero()
			.SetDisplay("Stoch %K Period", "Stochastic lookback period", "Stochastic");

		_stochDPeriod = Param(nameof(StochDPeriod), 3)
			.SetGreaterThanZero()
			.SetDisplay("Stoch %D Period", "Smoothing period for stochastic %K", "Stochastic");

		_slopeLookback = Param(nameof(SlopeLookback), 20)
			.SetGreaterThanZero()
			.SetDisplay("Slope Lookback", "Period for slope statistics", "Slope");

		_thresholdMultiplier = Param(nameof(ThresholdMultiplier), 1.5m)
			.SetGreaterThanZero()
			.SetDisplay("Threshold Multiplier", "Std dev multiplier for entry", "Slope");

		_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");

		_longStochLevel = Param(nameof(LongStochLevel), 30m)
			.SetRange(1m, 100m)
			.SetDisplay("Long Stoch Level", "Maximum stochastic level for long entries", "Signal Filters");

		_shortStochLevel = Param(nameof(ShortStochLevel), 70m)
			.SetRange(1m, 100m)
			.SetDisplay("Short Stoch Level", "Minimum stochastic level for short entries", "Signal Filters");

		_candleType = Param(nameof(CandleType), TimeSpan.FromMinutes(5).TimeFrame())
			.SetDisplay("Candle Type", "Type of candles to use", "General");
	}

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

	/// <inheritdoc />
	protected override void OnReseted()
	{
		base.OnReseted();
		_highs = new decimal[StochKPeriod];
		_lows = new decimal[StochKPeriod];
		_priceIndex = default;
		_priceFilled = default;
		_kValues = new decimal[StochDPeriod];
		_kIndex = default;
		_kFilled = default;
		_previousStochK = default;
		_slopeHistory = new decimal[SlopeLookback];
		_slopeIndex = default;
		_slopeFilled = default;
		_cooldown = default;
		_isInitialized = default;
	}

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

		_highs = new decimal[StochKPeriod];
		_lows = new decimal[StochKPeriod];
		_kValues = new decimal[StochDPeriod];
		_slopeHistory = new decimal[SlopeLookback];
		_priceIndex = 0;
		_priceFilled = 0;
		_kIndex = 0;
		_kFilled = 0;
		_slopeIndex = 0;
		_slopeFilled = 0;
		_cooldown = 0;

		var subscription = SubscribeCandles(CandleType);
		subscription
			.Bind(ProcessCandle)
			.Start();

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

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

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

		_highs[_priceIndex] = candle.HighPrice;
		_lows[_priceIndex] = candle.LowPrice;
		_priceIndex = (_priceIndex + 1) % StochKPeriod;

		if (_priceFilled < StochKPeriod)
			_priceFilled++;

		if (_priceFilled < StochKPeriod)
			return;

		var highest = decimal.MinValue;
		var lowest = decimal.MaxValue;

		for (var i = 0; i < StochKPeriod; i++)
		{
			highest = Math.Max(highest, _highs[i]);
			lowest = Math.Min(lowest, _lows[i]);
		}

		var range = highest - lowest;
		if (range <= 0)
			return;

		var rawK = (candle.ClosePrice - lowest) / range * 100m;

		_kValues[_kIndex] = rawK;
		_kIndex = (_kIndex + 1) % StochDPeriod;

		if (_kFilled < StochDPeriod)
			_kFilled++;

		if (_kFilled < StochDPeriod)
			return;

		var stochK = 0m;
		for (var i = 0; i < StochDPeriod; i++)
			stochK += _kValues[i];

		stochK /= StochDPeriod;

		if (!_isInitialized)
		{
			_previousStochK = stochK;
			_isInitialized = true;
			return;
		}

		var slope = stochK - _previousStochK;
		_previousStochK = stochK;

		_slopeHistory[_slopeIndex] = slope;
		_slopeIndex = (_slopeIndex + 1) % SlopeLookback;

		if (_slopeFilled < SlopeLookback)
			_slopeFilled++;

		if (_slopeFilled < SlopeLookback)
			return;

		var avgSlope = 0m;
		var sumSq = 0m;

		for (var i = 0; i < SlopeLookback; i++)
			avgSlope += _slopeHistory[i];

		avgSlope /= SlopeLookback;

		for (var i = 0; i < SlopeLookback; i++)
		{
			var diff = _slopeHistory[i] - avgSlope;
			sumSq += diff * diff;
		}

		var stdDev = (decimal)Math.Sqrt((double)(sumSq / SlopeLookback));

		if (!IsFormedAndOnlineAndAllowTrading())
			return;

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

		var lowerThreshold = avgSlope - ThresholdMultiplier * stdDev;
		var upperThreshold = avgSlope + ThresholdMultiplier * stdDev;

		if (Position == 0)
		{
			if (slope < lowerThreshold && stochK <= LongStochLevel)
			{
				BuyMarket();
				_cooldown = CooldownBars;
			}
			else if (slope > upperThreshold && stochK >= ShortStochLevel)
			{
				SellMarket();
				_cooldown = CooldownBars;
			}
		}
		else if (Position > 0 && slope >= avgSlope)
		{
			SellMarket(Math.Abs(Position));
			_cooldown = CooldownBars;
		}
		else if (Position < 0 && slope <= avgSlope)
		{
			BuyMarket(Math.Abs(Position));
			_cooldown = CooldownBars;
		}
	}
}