all right welcome back traders this is matt from zen and the art of trading today's video i'm gonna be covering how to detect basic candlestick patterns in pine scripts so this lesson is going to build off the previous lesson lesson 5 and in lesson 4 and 5 I showed you how to detect RSI conditions indicator conditions using the inbuilt pine script function and we're just going to adjust the script here so that alerts are only triggered when the RSI is overbought and oversold and we get a engulfing candle like this here and this up here we've got a bullish engulfing candle here and a bearish engulfing candle here after the RSI is gone overbought and oversold so I'm going to show you guys how to detect that condition using pine scripts and let's get into it I'm gonna break this up into three lines of code to make this easier to understand so the first thing we're doing here is we're gonna identify engulfing candles so the first one we're going to detect is a bullish engulfing candle and in order to detect a valid engulfing candle we need to find a candle that closes higher than the previous candle opened it's it can be different for stocks and things like that where there's gaps in price action but for this lesson we're gonna keep it simple we're just gonna focus on this catalyst Forex pair this gold versus US dollar where there are no gaps in price action and so what we need to detect is whether this current closing price of the current candle is greater than or equal to the previous opening price so using this as an example we want to check if this closing price is greater than or equal to this opening price and the way you would reference this previous bar is by using what's called an array so this array will reference depending what number you put in here say 1 2 3 4 100 whatever you put in here will reference the number in previous bars from the current candle so let's just assume that this right here is our current candle we want to detect whether the closing price is greater than the candle before it so we're looking one candle back so we put in a 1 in here but this is also going to detect if we just leave this as it is it's also going to detect hi-hi-hi closets because this candle here closed higher than the previous open as well so we need to filter this signal and make sure that the previous candle closed bearish and all that means is that the closing price is lower than the opening price so in order to do that we combine these two boolean values so we want to find out did the candle close higher than or equal to the previous open and did the previous candle close lower than its opening price that's it that's all we need in order to detect this pattern here very simple so the next one is a bearish engulfing candle and it's basically just the opposite of all of this so we're looking for a candle that closed less than or equal to the previous open and the previous candle must have closed bullish so in this case the previous closing price must be greater than the previous open price and now that's all we need in order to detect bullish and bearish engulfing candles and then to create a trading signal out of this we're going to create a new boolean value called trade signal and trade signal is going to be assigned to we're going to combine these two variables these two boolean values with these two boolean values so the way we're going to do that is we're going to use as we're going to open two parentheses so we're gonna have one open bracket and then another open bracket so if you remember algebra from school whatever is in this bracket here this X is going to be executed before whatever's in the outer brackets so this will be execute X will be executed before Y the reason we need this is that we're going to check whether the RSI was overbought on the current candle or the previous candle so see in this example here there is no RSI signal below the candle that's because when this candle closed the RSI indicator went from oversold to not oversold but the previous candle was oversold so we want to detect this candlestick pattern if the RSI was oversold on this candle or the previous candle so the way we would do that in Pine script is we would say is RSI oversold or is the RSI oversold on the previous candle so the same way we can reference previous open/close high-low prices using this array functionality we can do the same with our own custom boolean x' so this in a bracket here will be true only if the current candle is oversold or the candle before it is oversold and then we want to combine that with our bullish engulfing candle detection so we'll just type in here bullish you see so now this will turn true this trade signal boolean will turn true if the current RSI is oversold or it was oversold on the previous candle and we got a bullish engulfing candle signal we want to do the same for bearish so this trade signal is going to detect both bullish and bearish signals and so after this outer bracket that encompasses all of this boolean calculation we want to add the or operator and do the same thing for the bearish detection so to open brackets and then is the RSI overbought or was it over bought on the previous candle and do we have a bearish engulfing candle detected closed bracket so now this line of code will turn true if we detect a bullish or bearish engulfing candle while that while the RSI is overbought or oversold now if we save this script nothing's going to change here because we haven't changed our plot shape and our alert functionality so what we'll do here is we'll say plot the overbought signal the cell signal only if we get a trade signal and that trade signal is a bearish engulfing candle we'll do the same for the next plot shape we're going to say here plot a buy signal only if we got a trade signal and it was a bullish engulfing candle we'll do the same down here he cept here because we want these alerts to be triggered for both bullish and bearish engulfing candle signals we only need to put in trade signal here we don't need to specify what type of trade see you that's only for plotting the signal to the chart so now if I hit save we're going to eliminate all of these signals here and we'll only detect this one and this one up here so let's hit save and watch the magic happen there we go we get only two signals on this chart now and we have our bullish buy signal when the RSI goes oversold and we get a bullish engulfing candle and then the same is true of a sell signal it only plots when the RSI goes overbought and we get a bearish engulfing candle and the same is true of our alerts we'll only get an alert to our phone and charting platform if these market conditions are met and so that's the beginnings of using plan script to create your own strategy scripts or to detect your own setups in the markets so once you get proficient at using pine script you can use these these functionality and what I've been teaching you to detect your own trading setups in the markets and send alerts to your phone or email account whenever your trading setup appears in the markets this helps you to stay on top of the markets without having to check the charts especially if you trade the 15-minute chart or the five-minute chart this can help you stay on top of multiple markets depending on your trading view subscription type you can set as many alerts as you want I'm on the Pro I'm on the Pro Plus subscription so I can set as many alerts as I want and I could set an alert for every currency pair that I'm trading and then I don't have to scroll through my charts all the time to detect these setups this script will detect it for me and send me an alert so that's it for this lesson I hope you found it helpful and in the next lesson I'm not sure what I will be covering but it'll be something more advanced than this so these lessons are going to build on top of each other and become more and more advanced so if you haven't seen the other lessons go back and watch them if you need a pine script otherwise hang in there more content is coming I appreciate your support please hit the like button and the subscribe button if you want to be alerted whenever I come out with a new pine script lesson and I'll see you in the next one have a great week guys good luck with your trading good luck with your coding I'll speak to you soon take it easy [Music]
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