Discussing the article: "Automating Trading Strategies in MQL5 (Part 43): Adaptive Linear Regression Channel Strategy"

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Check out the new article: Automating Trading Strategies in MQL5 (Part 43): Adaptive Linear Regression Channel Strategy.

In this article, we implement an adaptive Linear Regression Channel system in MQL5 that automatically calculates the regression line and standard deviation channel over a user-defined period, only activates when the slope exceeds a minimum threshold to confirm a clear trend, and dynamically recreates or extends the channel when the price breaks out by a configurable percentage of channel width.

The Linear Regression Channel strategy applies a least-squares linear regression line over a set number of bars to identify the underlying trend direction and strength, then adds parallel bands at a defined number of standard deviations above and below the regression line to form upper and lower boundaries. This creates a dynamic price channel that represents the expected price range in a trending market: price oscillating within the channel indicates continuation, touches or slight penetrations of the boundaries offer pullback entries, while significant deviations signal potential exhaustion or the need to recalculate the regression on newer data. We usually buy when the price closes below the lower channel and sell when the price closes above the upper channel.

In our implementation, we will calculate the regression slope, intercept, and standard deviation over a configurable period, only creating the channel when the absolute slope exceeds the minimum threshold to confirm directional movement. The channel will be anchored from the oldest bar in the period to a future point extended by a percentage of its duration, filled in two colored zones (pink upper half, light green lower half) with solid trendlines for upper, middle, and lower boundaries. On each new bar, we will either extend the channel one bar to the right if the price remains contained, or fully recreate it if the price deviates beyond a defined percentage of channel width.

Trades will open on clean breakouts from inside the channel with fixed pip stop-loss/take-profit, maximum concurrent positions per direction, and an inverse mode option; all positions in one direction close immediately upon crossing the middle line. Labels for upper, middle, and lower channels move with the right edge, and arrows mark every entry. Inverse mode simply swaps buy and sell logic, allowing the same program to trade mean-reversion breakouts instead of continuation pullbacks. It is something we figured would be helpful in case we want to do the opposite. In a nutshell, here is a visual representation of our objectives.

Author: Allan Munene Mutiiria