How to detect TRADING SETUPS with PINE SCRIPT • Pine Script [OUTDATED V4] Tutorial

How to detect TRADING SETUPS with PINE SCRIPT • Pine Script [OUTDATED V4] Tutorial

hey traders this is matthew from
pinescript mastery welcome back to
another pinescript video lesson
in today's video i'll be showing you how
to detect candlestick patterns while the
rsi is overbought or oversold
now the techniques shown in this video
can be used with any type of market
condition
so you could use stochastics emas
bollinger bands you name it
so i hope you find it helpful and let's
get started so first things first
all i've done here is add the rsi to my
chart so that we can see what the value
is when we're working with our script
and all i'm going to do here is open up
the panscript editor and we just have a
blank script here all i've done is
change the title and short title
and we've set overlay to true because we
want this script to draw over the top of
price action
not into its own box like the rsi does
here
so let's get started the first thing i
like to do as always
is get user input
and in today's video we need three
different values from the user
we need to get the rsi length that they
desire uh the next value we need is rsi
overbought and i'm going to use an input
type
of float here because that just gives
the user a little bit more
flexibility and control over the value
so instead of just setting it to 80 or
70
let's set it to 70 by default uh they
could set it to 70.5
70.1 you get the idea so that i like to
just give my users as much control as
possible over
my scripts but of course you could hard
code these values if you wanted to
and just put a 70 there instead it's up
to you
but it's always good practice to give
your user as much control as possible
next up is rsi oversold level and i can
just copy this line of code here
paste it in there change this to
oversold
change this to 30. and that's all the
user inputs we need
for this particular script the next
thing we need to do is get our actual
rsi values and our
trading conditions so in this case we're
just checking if the rsi is overbought
or oversold
or in other words if the rsi value
exceeds 70 or 30.
so that's quite easy to do all we need
to do first of all is get the rsi value
so we use the inbuilt function rsi and
we pass
it a price source so in this case we're
just going to calculate the rsi based on
closing price
like the normal rsi would and we're
going to pass it our rsi length
from the settings menu so that our users
can adjust this if they
desire next up we need to check
our rsi value against our rsi
overbought and oversold levels so first
of all let's create a new
boolean variable called rsi bullish
and this is going to be set to true only
if the rsi
value that we just got here
is less than or equal to our rsi
oversold level because we want to be
buying
when price is overextended to the
downside and selling when it's
overextended to the upside
so this will check the current candles
rsi value
but we also need to check the previous
candles rsi value
because there will be occasions such as
in here
where notice the rsi goes overbought
on this bar but if the next bar was a
bearish engulfing candle for example
and that's the setup we were looking for
then the script will not detect it as
valid because the rsi is no longer
overbought so we need to check is the
current candle's rsi value
oversold or was the previous
candles rsi value oversold
if either of these two conditions are
met then
we can begin looking for our entry
candlestick
setup pattern and in today's example
we're just going to be detecting bullish
and bearish engulfing candles just
because they're
relatively simple to detect and the
concept can be applied to any
candlestick pattern
so it really doesn't matter what we
detect here and at the end of this video
i'll show you where you can get the code
for detecting other candlestick patterns
if you want to use different candlestick
patterns
but first of all let's copy this line of
code here paste it
in there rename this to rsi bearish
and we need to flip these operators
around so now we're checking
is the rsi greater than or equal to our
rsi
overbought threshold
and that's it we are now detecting the
rsi value
and our trading conditions the next
thing we need to do
is detect our candlestick
so as i said we're detecting bullish
engulfing candles and bearish engulfing
candles
so in the case of a bearish engulfing
candle we want to detect if the current
closing price is less than or equal to
the previous candle's
opening price and did the previous
candle
close as a bullish candle that's all we
need to know in order to detect
bearish engulfing candles so let's go
back to the editor and we'll write that
out in code
so for a bearish engulfing candle we
need to check is the current
closing price less than or equal to
the previous candles open price and
did the previous candle close greater
than
its opening price or in other words did
it close green
or bullish and then we need to do the
same thing for bearish candles
so it's just the opposite here we want
to detect
if the current candle closed
higher than the previous candles open
and did the previous candle
close bearish so we need to know so
did the current candle close greater
than or equal to the previous candles
open
and did the previous candle close lower
than it's open
done so we need to do in order to detect
bullish and bearish engulfing candles
now obviously you could optimize this
you could
only search for swing low engulfing
candles
or swing high bearish engulfing candles
you could take the size of the candle
into consideration
you could check if it closes above the
previous candles wick
or below in a bearish example and this
will affect
the efficacy and accuracy of your script
if you're using it to trade so there's
just some ideas to play around with we
won't do that in this video because it
just takes too long to go over
and i want to keep this video as short
and to the point as possible
and if you need help with this i have a
free basics course over at
panscriptmastery.com
where i go into great detail about how
to do this sort of thing
but anyway let's get back to our code
and now that we have our candlestick
patterns detected
we need to detect valid trading
setups so we need to combine these two
conditions we need to check is our rsi
overbought or oversold
and did we get a bullish or bearish
golfing candle
so i'm going to create a new section
code here and i'm going to call this
section
detect trading setups we're going to
have a bullish
setup and a bearish setup
now the bullish setup is simply going to
be is
our rsi bullish condition met
so is rsi oversold and
did we get a bullish engulfing
candlestick pattern simple same with the
bearish setup was our rsi bearish
set to true and did we get a bearish
engulfing candle stick pattern and
that's it
we're pretty much done now we just need
to draw this information to our chart
so let's do that now draw data
not dara draw data to chart
so we're going to use the plot shape
function here we're just going to draw a
down arrow a red down arrow above
bearish setups and a green up arrow
below
bullish setups so we're going to use a
plot shape function
and now you could just pass bullish
setup
into here and that would work just fine
but i prefer to do it a little bit
differently i like to use a conditional
statement in here
and i like to say do we have a bullish
setup
question mark if so then i want to plot
one
otherwise i want to plot n a or not a
number
not applicable and this will make
more sense when we finish writing this
code i'll show you exactly why i do this
in here but you don't have to if you're
not used to conditional statements you
don't understand them you don't want to
use them
just get rid of this part here next up
we need to give it a style
which is a shape so if you type shape
dot
control space or command space if you're
on a mac
this will give you your list of shapes
you can choose from
so in this particular case i want to
just go with arrow up and arrow down
so for bullish setup we want to use
arrow up
i want to give it a color of color dot
green since it's a bullish
setup we need to set the location
to location dot below bar
because we want this arrow drawing
underneath the bars not on top of them
otherwise it won't
look right then finally it's a it's good
practice
to title your plots you don't have to do
this this is
completely optional but it'll make sense
why
this is a good idea when we're finished
writing out these two plot shape
functions
so let's paste that down there
and change this to bearish setup change
our shape to arrow
down our color to color.red
our location to above bar since it's a
bearish setup we want it above the bar
pointing down
change our title to bearish now we can
get rid of our plot close function
every script needs at least one plot
call in it
and now that we have our plot shape
functions written out we don't need this
anymore
so now i can save the script should
compile without any errors there we go
i can click add to chart and we'll now
be detecting
candlestick patterns bearish and bullish
engulfing candles
whenever the rsi goes overbought
or oversold very simple but extremely
effective
and this is just the beginning once you
master these techniques you can apply
them to any indicator
any candlestick pattern you can layer
them on top of each other
you could compare multiple time frames
you could look for divergences
in price action versus your indicator
values
you could draw your stops and targets
using the atr
indicator and automatically calculate
all that information
for you basically the possibilities are
limitless within
the pine script framework once you
master these techniques
so i'm just showing you the basics today
if you want to take this stuff to the
next level then again head over to
pinescriptmastery.com where i have a
bunch of lessons covering
how to make profitable strategy scripts
and how to create your own trading tools
to assist in your trading process
and before we finish this video i'll
show you how to add alert functionality
to this script
so you can get an sms or push
notification alert whenever these
types of setups are detected by your
script and then it's like having a
second pair of eyes on the markets
at all times you can leave your computer
and rest assured that you'll get an
alert sent to your phone
whenever a trading setup is detected it
can save an immense amount of time in
your trading process
once you write a script to assist in
your own trading but before we continue
let me demonstrate why i put this
conditional statement in here
if you hover over a candle that does not
have
a signal on it you can see here it has n
a
in red this is our bearish setup
plot so when the script does not detect
a trading setup it just draws n a up
here
if i remove this conditional statement
and i save the script
now you see when i hover over any candle
that does not have a bearish setup
we get 0.000
drawing to our chart and this will draw
as many zeros
as there are decimal places on your
price scale
and now for a small script like this
that's not a that's not an issue
doesn't really matter but if you're
writing a long and complex script that
has
dozens of plots you can have numbers
stretching across your entire chart
which obstructs your chart it just looks
messy
of course you can come up into the
settings menu and go to status line and
turn off
indicator values and that will remove
those numbers
but i like to leave them on because
quite often i rely on these numbers
to inform my trading process so that's a
little trick that i learned
to do is just using this conditional
statement if i save the script now
you'll notice that when we hover over a
candle that has a
setup detected we're drawing 1.000
but when we're over a candle that
doesn't we're just drawing n
a and as i just mentioned if you have
over a dozen plots
on your chart which some scripts do this
can save a lot of space
in your indicator values section now
finally
let's add alert functionality to this
script
so i'm just going to create a new little
section a new
single line of code here and we're just
going to call the alert
condition function now you can only call
this once per script
so we need to combine our setups into
our alert condition
but that's really easy to do all we need
to do is type in here
bullish setup or bearish
setup comma
so this is our condition so you could
also write here condition
equals condition is set to bullish setup
or bearish setup if either of these
variables are true
then an alert will be triggered and then
finally this
condition this alert condition requires
a title
so we'll just call this rsi setup alert
and it requires a message so i'm just
going to say rsi
trading setup detected for
and then i'm going to stick in here my
ticker
so this ticker placeholder will be
replaced with whatever symbol
i'm on when i set the alert so that's it
save the script
we now have a functioning rsi
exhaustion detection script that is
detecting bullish
and bearish engulfing candles
whenever the rsi exceeds 30
or 70 and we get a bullish or bearish
engulfing candle
you can come up to the settings menu you
can change these values so i could
change this rsi
length and these rsi
thresholds and that will adjust how many
setups are detected
and accuracy of those setups obviously
and if we come up to the settings menu
we go to style
because we named our plots in our script
we can change the color
of these symbols that are drawing onto
our chart
we can change the shape of them and
where they are placed so that's why i
always recommend
to title your plots whenever possible
so that's it for today's lesson finally
before i let you go i just want to
quickly show you
how you can quickly and easily get the
source code
to detect other candlestick patterns if
you want to replace this bullish
and bearish engulfing candlestick
pattern with a different candlestick
pattern
so if you come up here to your
indicators
and strategies button click on that
you'll see a new section that was added
here recently
called candlestick patterns and this is
created by the trading view team
and if you click on this there's a list
here a long list
quite a long list of various candlestick
patterns
so i've actually never heard of an
abandoned baby candlestick pattern
but hey if it works it works
so let's go with doji let's keep it
simple i mean you could
check any of these candlestick patterns
here but just for this example we're
going to go with doji so if i click
on that script it'll add it to my chart
and now it's detecting
doji candles all over my chart
so if i wanted to use these candlestick
patterns
in my rsi script all i need to do is
come up here
click on the source code button of this
candlestick pattern script and that will
open up the source code
of that candlestick pattern now some of
these candlestick patterns are way more
complicated than they need to be
but this can help you learn how to
detect some of these
candlesticks now to be honest with you
these scripts are insanely over
complicated
you do not need this much code in order
to detect
a doji candle i'm not entirely sure
why the trading view team went and made
these
scripts so convoluted but i guess
they're just showing off
various ways you can use pinescript in
order to detect
certain patterns in the market but if
you go through these scripts and you
analyze what they're doing here
you should be able to find a simple way
to convert this
into a couple of lines of code and then
you come up to
the source code of this rsi script and
you just paste that code into here
and rename your candlestick patterns and
then all you need to do is check
the rsi conditions and then check if
you are detecting your various
candlestick patterns now if you want
help with this
i have a course where i go into quite a
lot of detail about how to detect
various candlestick patterns
and they're a lot a lot lot simpler
than these inbuilt trading view scripts
so here's
my password mastery course here
we come down to the candlestick patterns
section there's a
couple of very basic candlestick
patterns in here but they're so much
more simple
than the inbuilt training view scripts
and let's go with
let's say hammer and shooting star
candlestick patterns
so here's a video lesson on how to
detect these patterns but if i just come
down here
and i just copy this section of code
here we go back to
our rsi script and now we can remove
this ridiculously
complex doji script open up our script
come down to our candlestick patterns
section and here i'm going to just add a
new section just
so that we don't need to delete this
i'm going to say detect hammers and
stars
paste that code in there and now i can
copy
hammer candle over our bullish engulfing
candles
and star candle over our bearish
engulfing candle pattern
save the script and now the script will
only be detecting
bearish shooting star candles and
bullish
hammer candles whenever the rsi is
overbought or oversold
such as in here so you can see there
long wick to the downside and
a smaller body on top than the wick
you can obviously adjust these uh
parameters
for your candlestick patterns in the
codes quite easy to do
but that's the end of this lesson i hope
you enjoyed that i hope you found that
interesting and informative i'll be back
soon with new
free instructional videos but if you
can't wait for that head over to my
website
and check out the free course because
there's a few things i cover in there
that i haven't covered on youtube
and if you're new to pinescript then i'm
sure you'll find that information
really valuable and helpful in your
coding journey
that's it for today thanks for watching
thanks for your time
and i'll see in the next video have a
great week and good luck with your
training
take care goodbye