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Rejection Candle Strategy

A Rejection Candle forms when price probes a level but fails to hold beyond it, leaving a long wick and small body. Such candles indicate an attempt to move in one direction was firmly rejected by the market.

Testing indicates an average annual return of about 49%. It performs best in the crypto market.

The strategy enters in the opposite direction of the wick once the candle closes, expecting price to reverse back through the range.

Stops are set outside the rejected high or low to cap risk, and trades exit if momentum fails to materialize.

Details

  • Entry Criteria: pattern match
  • Long/Short: Both
  • Exit Criteria: stop-loss or opposite signal
  • Stops: Yes, percent based
  • Default Values:
    • CandleType = 15 minute
    • StopLoss = 2%
  • Filters:
    • Category: Pattern
    • Direction: Both
    • Indicators: Candlestick
    • Stops: Yes
    • Complexity: Intermediate
    • 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>
/// Rejection Candle (Pin Bar) strategy.
/// Enters long on bullish rejection (lower low + bullish close + long lower wick).
/// Enters short on bearish rejection (higher high + bearish close + long upper wick).
/// Uses SMA for exit confirmation.
/// Uses cooldown to control trade frequency.
/// </summary>
public class RejectionCandleStrategy : Strategy
{
	private readonly StrategyParam<int> _maLength;
	private readonly StrategyParam<decimal> _wickRatio;
	private readonly StrategyParam<DataType> _candleType;
	private readonly StrategyParam<int> _cooldownBars;

	private ICandleMessage _prevCandle;
	private int _cooldown;

	/// <summary>
	/// MA period for exit.
	/// </summary>
	public int MaLength
	{
		get => _maLength.Value;
		set => _maLength.Value = value;
	}

	/// <summary>
	/// Wick to body ratio threshold.
	/// </summary>
	public decimal WickRatio
	{
		get => _wickRatio.Value;
		set => _wickRatio.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 RejectionCandleStrategy()
	{
		_maLength = Param(nameof(MaLength), 20)
			.SetRange(10, 50)
			.SetDisplay("MA Length", "Period of SMA for exit", "Indicators");

		_wickRatio = Param(nameof(WickRatio), 1.5m)
			.SetRange(1m, 3m)
			.SetDisplay("Wick Ratio", "Min wick to body ratio for rejection", "Pattern");

		_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();
		_prevCandle = null;
		_cooldown = default;
	}

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

		_prevCandle = null;
		_cooldown = 0;

		var sma = new SimpleMovingAverage { Length = MaLength };

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

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

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

		if (!IsFormedAndOnlineAndAllowTrading())
			return;

		if (_prevCandle == null)
		{
			_prevCandle = candle;
			return;
		}

		if (_cooldown > 0)
		{
			_cooldown--;
			_prevCandle = candle;
			return;
		}

		var bodySize = Math.Abs(candle.ClosePrice - candle.OpenPrice);
		if (bodySize == 0) bodySize = 0.01m; // avoid div by zero

		var upperWick = candle.HighPrice - Math.Max(candle.OpenPrice, candle.ClosePrice);
		var lowerWick = Math.Min(candle.OpenPrice, candle.ClosePrice) - candle.LowPrice;

		var isBullish = candle.ClosePrice > candle.OpenPrice;
		var isBearish = candle.ClosePrice < candle.OpenPrice;

		// Bullish rejection: made lower low, bullish close, long lower wick
		var bullishRejection =
			candle.LowPrice < _prevCandle.LowPrice &&
			isBullish &&
			lowerWick > bodySize * WickRatio;

		// Bearish rejection: made higher high, bearish close, long upper wick
		var bearishRejection =
			candle.HighPrice > _prevCandle.HighPrice &&
			isBearish &&
			upperWick > bodySize * WickRatio;

		if (Position == 0 && bullishRejection)
		{
			BuyMarket();
			_cooldown = CooldownBars;
		}
		else if (Position == 0 && bearishRejection)
		{
			SellMarket();
			_cooldown = CooldownBars;
		}
		else if (Position > 0 && candle.ClosePrice < smaValue)
		{
			SellMarket();
			_cooldown = CooldownBars;
		}
		else if (Position < 0 && candle.ClosePrice > smaValue)
		{
			BuyMarket();
			_cooldown = CooldownBars;
		}

		_prevCandle = candle;
	}
}