Previous Candle Theory

// This Pine Script™ code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/
// © TraderNunz

//@version=5
strategy("Previous Candle Theory", overlay=true, default_qty_type=strategy.percent_of_equity, default_qty_value=10)

// Define the tick size
tick_size = syminfo.mintick

// Input fields for user to set stop loss and take profit in ticks
ticks_stop_loss = input.int(20, title="Stop Loss (ticks)")
ticks_take_profit = input.int(40, title="Take Profit (ticks)")

// Input fields for EMA and SMA periods
ema_period = input.int(9, title="EMA Period")
sma_period = input.int(21, title="SMA Period")

// Input field to select the type of moving average
use_ema = input.bool(true, title="Use EMA (false = SMA)")

// Calculate the moving averages
ema_value = ta.ema(close, ema_period)
sma_value = ta.sma(close, sma_period)

// Choose which moving average to use based on the input
ma_value = use_ema ? ema_value : sma_value

// Calculate the stop loss and take profit prices based on ticks
stop_loss_price_long = close - (ticks_stop_loss * tick_size)
take_profit_price_long = close + (ticks_take_profit * tick_size)

stop_loss_price_short = close + (ticks_stop_loss * tick_size)
take_profit_price_short = close - (ticks_take_profit * tick_size)

// Define the condition for a positive or negative candle
is_positive_candle = close > open
is_negative_candle = close < open

// Entry conditions based on the previous candle's direction and selected moving average
long_condition = is_positive_candle[1] and is_positive_candle and close > ma_value
short_condition = is_negative_candle[1] and is_negative_candle and close < ma_value

// Execute trades based on the conditions
if (long_condition)
    strategy.entry("Long", strategy.long)

if (short_condition)
    strategy.entry("Short", strategy.short)

// Exit conditions based on tick-based stop loss and take profit
strategy.exit("Exit Long", from_entry="Long", stop=stop_loss_price_long, limit=take_profit_price_long)
strategy.exit("Exit Short", from_entry="Short", stop=stop_loss_price_short, limit=take_profit_price_short)

// Plot the selected moving average for visual reference
plot(ma_value, title="Selected MA", color=use_ema ? color.blue : color.orange, linewidth=2)

// Plot the candles for visual reference
plotshape(series=long_condition, title="Long Signal", location=location.belowbar, color=color.green, style=shape.labelup, text="BUY")
plotshape(series=short_condition, title="Short Signal", location=location.abovebar, color=color.red, style=shape.labeldown, text="SELL")

// Plot a background color for visual feedback on the chart's timeframe
bgcolor(long_condition ? color.new(color.green, 90) : short_condition ? color.new(color.red, 90) : na)