Reply To: Description of Price Action Engulfing Candles Strategy

Forums Strategies and Expert Advisors Price Action Engulfing Candles EA Description of Price Action Engulfing Candles Strategy Reply To: Description of Price Action Engulfing Candles Strategy

#4517
Dominik
Administrator

Hi everyone!

Today I’ll show you another parameters of system, which define where to put Take Profit, Stop Loss and how to protect from unwanted trades. The principle of functioning is based on Supply and Demand Zones (or Support and Resistance Levels). No matter what is the terminology, because it works the same – we just see on chart tops and bottoms and these are our potential levels for putting TPs and SLs.

System has two parameters which decide where to put TP. First (“Candles_To_Take_To_TP”) defines how many candles we want to take from the past to find extreme and second (“TP_Distance_from_Extreme”) defines distance in points from highest high or lowest low to put TP. If value of distance is positive then TP is over highest high for BUY orders and below lowest low for SELL orders. If value of distance is negative, TP is below highest high for BUY orders and above lowest low for SELL orders. Let’s see on screenshot:

For Stop Loss is very similar. “Candles_To_Take_To_SL” defines how many candles from past we want to check to find extreme value of highest high for SELL order or lowest low for BUY order. And “SL_Distance_from_Extreme” defines distance to put SL from highest high or lowest low value. For BUY orders, SL is below lowest low value if this parameter is positive, if negative – SL is above lowest low. For SELL orders, SL is above highest high for positive values and below for negative values of this parameter. Let’s see on example:

I will explain one more parameter being in topic of SL – “Max_SL”. This parameter defines maximal distance in points between BUY or SELL STOP and SL to open the order. We don’t want to risk much more than we can earn (Risk to Reward ratio), so we don’t want to open orders when price is far away from SL. This parameter can be changed in future to work on the basis of proportions instead of constant value.

In order to protect against opening unwanted orders by the system I’ve coded another three parameters. “Candles_To_Take_To_Extreme” defines, as always, how many candles we take from the past to find extreme value (HH for BUY, LL for SELL) and “Min_Stop_Distance_To_Extreme” defines minimal distance between BUY STOP and highest high or SELL STOP and lowest low. In simple words, if distance between BUY or SELL STOP and long-term top or bottom on chart is too small, we don’t want to risk opening order for a small profit, also with low probability. Last parameter from these three, “Min_Stop_Distance_To_TP”, works similar, but instead distance between STOP and long-term HH or LL value it calculates distance between STOP and Take Profit. And again, it protects system from opening orders which are too close to Take Profit, which in most cases is on last top or bottom (so it’s support or resistance level), and because price is almost there we don’t want to risk and wait if price can push through it or just bounce from that level and go in an undesired direction. I think it’s clear and understable enough and I don’t need to show it on screenshot.

Tomorrow, I will try to make next part. Regards!