1Hr Forex Trading Strategy With MACD

This 1 Hr Forex Trading Strategy With MACD is a trend trading system and as the name says, the timeframe you can use to trade this system in the 1hr.

This forex strategy may take a while to understand but have a close look at the charts below and you will understand that it is simple.

What currency pairs are suitable for the 1hr forex trading strategy with Macd?

Preferably the majors but you can also use this on others.

 

Forex Indicators You Need For The 1hr Forex Trading Strategy With MACD

You need the following indicators for this forex strategy:

  • 50 exponential moving average which you must apply to HIGH
  • 50 exponential moving average applied to LOW
  • 15 exponential moving average applied to CLOSE
  • custom indicator Macd-with-EMA, click to download (settings 35, 70, 1, 12), see below:

1hr Forex Trading Strategy With MACD

 

Selling Rules

  1. MACD histogram must be in right color, red for downtrend (or whatever color you chose on the custom MACD indicator)
  2. MACD Moving Average must be “within” the colored area of the MACD histogram
  3. When price goes up and hits the 15ema and bounces back down or goes up through the 15ema and reverses back it is a sell trade signal  as long as the following conditions are met: the low of the candlestick is not more than 50 pips away from the 15 EMA and 15 EMA must not be  “within” the 50 EMA channels.
  4. The trade setup candlestick is the candle that touches the 15 ema OR passes through it but makes a lower low, which means, it breaks the low of the previous candlestick. On this candlestick, you set a sell stop order 2-5 pips (allow for spread) below its low to catch the downward breakout of price move.
  5. Place you stop loss at 100 pips.
  6. Take profit target at 100 pips.
  7. Move trailing stop to break even at 50 pips.
READ  Gartley Pattern | Gartely Pattern Forex Trading Strategy

This chart explains what it means to have the MA of MACD “within” the histogram (read lines etc), this is for a sell setup:

1hr Forex Trading Strategy With MACD

Here’s an example of a sell trading setup:

1hr Forex Strategy With MACD

Buying Rules

For buying, you do the exact opposite of what you do in sell setup, but here are the trading rules:

  1. MACD histogram must be in right color,green for uptrend
  2. MACD Moving Average must be “within” the colored green area of the MACD histogram
  3. When price goes down and hits the 15ema and bounces back up or goes down through the 15ema and reverses back it is a buy trade signal  as long as the following conditions are met: the high of the candlestick not more than 50 pips away from the 15 EMA and 15 EMA must not be  “within” the 50 EMA channels.
  4. The trade setup candlestick is the candle that touches the 15 ema OR passes through it but makes a higher high, which means, it breaks the high of the previous candlestick. On this candlestick, you set a buy stop order 2-5 pips (allow for spread) above its high to catch the upward breakout if it happens.
  5. Place you stop loss at 100 pips.
  6. Take profit target at 100 pips.
  7. Move trailing stop to break even at 50 pips.

 

Disadvantages of the 1hr Forex Trading Strategy With MACD

  • MACD and Moving Average are all lagging indicators, so there always the late entry factor right there.
  • the system will not perform well in a ranging market

MACD-EMA-Trend-Strategy

Hello friends I want to share with you simple trend following strategy using MACD and EMA’s. If used correctly the strategy can easily generate around 75% success rate!

For this strategy we need two indicators: MACD and EMA

MACD is with default settings 12,26,9

Two Exponential Moving Averages with periods of 120 and 300

We need to follow few conditions:

  1. We use this strategy on 1 minute chart with 30 to 45 minute expiries
  2. Determine the overall trend if 120 Exponential Moving Average is below the 300 we are in a down trend and vice versa if 120 is above the 300 EMA it’s up trending.
  3. For down trend we wait MACD to turn positive (pullback) and immediately after MACD turns negative again we enter PUT for 30 to 45 min expiry. Vice versa if we are up trending we wait MACD to turn negative (pullback) and immediately when MACD turns positive we enter for call 30 – 45 min expiry.

Few more advices: Don’t use the strategy 30 min before or after major news events. Seek for good range between the two EMA’s. And use it mostly on London and USA sessions when markets are most volatile. Also, don’t forget to back test this strategy and use it on demo account. You should know that no matter how strong particular strategy is, you will need some time to master it and eventually to see good consistent results.

MACD Trend Following Strategy- Simple to learn Trading Strategy

If you’re searching for that one trend following strategy that will turn your trading around, then today’s your lucky day. The MACD Trend Following Strategy as the name suggests is one of the best trend following strategies and this strategy is similar to our trend following strategy we have developed a while back. One of the most important features of trend following strategies is that even if you’re wrong on the trade, usually you can limit your losses because ultimately the market will reverse and resume the trend.  But, at the same time, which is even more important, it maximizes the potential profit as well.

Our team here at Trading Strategy Guides.com only strives to provide you with the best trading strategies.

The MACD Trend Following Strategy works best on the higher time frames like the 4h chart or the daily chart. So if you’re a swing trader this is the perfect strategy for you. We have developed this trend following strategy because we felt the need to show the world how to properly use the MACD indicator and to show how accurate this tool can be in forecasting market turning points.

Now, if you’re a day trader and don’t like holding positions overnight, don’t you worry we’ve got your back. Our favorite day trading strategy Day Trading Price Action- Simple Price Action Strategy has attracted a lot of interest from the trading community.

Let’s move forward now to the incredible MACD strategy that we have developed. We will show you how to use macd effectively, what a true trend indicator looks like, a super profit indicator, and why we think the MACD indicator is the best trend following indicator.

What is the MACD indicator used in this MACD strategy?

The beauty of the MACD Trend Following Strategy is that it only requires the use of one simple tool: the MACD indicator, which by the way is among the most popular Forex indicator.

Without further ado, let’s move straight to the point and:

  •  Define what is the MACD indicator;
  •   How the MACD indicator works;
  •  What MACD indicator setting to use;

The MACD is one of the most powerful trend following and momentum indicator. The MACD is a commonly used technical indicator and the acronym stands for Moving Average Convergence Divergence.

Put it simple, a trend following indicator helps you to determine the overall direction of the market, be it up (bullish) or down (bearish). While a momentum indicator seeks to determine the speed of the trend. Put them together and you have the perfect combination for a trend following strategy.

A picture is worth a thousand words, so here is how the classical MACD indicator looks like on a chart:

MACD strategy

The MACD can provide earlier indication that an OLD trend is about to end and a NEW trend is about to start. The MACD manipulates its moving averages in a rather clever way and can signal changes in trend much closer to when they actually occur. Please have a look at the chart example below to see the power of the MACD indicator.

macd trading rules

So, how does it work?

Well, the MACD’s moving averages and histograms (see chart below) are derived from the price chart. They are calculated using a formula which adds greater weight to the most recent price data.

Best trend following strategy

Remember? Price is king!

Our popular Price Action Pin Bar Trading Strategy is a great introduction to what a pure price action strategy should look like and it can be also used in combination with the MACD Trend Following Strategy for higher success rate.

Trading The MACD Divergence

Moving average convergence divergence (MACD), invented in 1979 by Gerald Appeal, is one of the most popular technical indicators in trading. The MACD is appreciated by traders the world over for its simplicity and flexibility because it can be used either as a trend or momentum indicator.

Trading divergence is a popular way to use the MACD histogram (which we explain below), but unfortunately, the divergence trade is not very accurate as it fails more than it succeeds. To explore what may be a more logical method of trading the MACD divergence, we look at using the MACD histogram for both trade entry and trade exit signals (instead of only entry), and how currency traders are uniquely positioned to take advantage of such a strategy.

MACD: An Overview
The concept behind the MACD is fairly straightforward. Essentially, it calculates the difference between an instrument’s 26-day and 12-day exponential moving averages (EMA). Of the two moving averages that make up the MACD, the 12-day EMA is obviously the faster one, while the 26-day is slower. In the calculation of their values, both moving averages use the closing prices of whatever period is measured. On the MACD chart, a nine-day EMA of the MACD itself is plotted as well, and it acts as a trigger for buy and sell decisions. The MACD generates a bullish signal when it moves above its own nine-day EMA, and it sends a sell sign when it moves below its nine-day EMA.

[ Learning to trade using the MACD indicator and other technical indicators takes dedication and practice.  If you want to learn to identify and capitalize on price trends of any tradable security in any market, Investopedia Academy’s technical analysis course is a great start. ]

The MACD histogram is an elegant visual representation of the difference between the MACD and its nine-day EMA. The histogram is positive when the MACD is above its nine-day EMA and negative when the MACD is below its nine-day EMA. If prices are rising, the histogram grows larger as the speed of the price movement accelerates, and contracts as price movement decelerates. The same principle works in reverse as prices are falling. See Figure 1 for a good example of a MACD histogram in action.

Trading with MACD – Simple Effective Strategies Explained

The MACD is one of the most popular and broadly used indicators for Forex trading. The letters M.A.C.D. is abbreviation for Moving Average Convergence Divergence. The MACD indicator, which requires Moving Averages as its input, falls into the group of the lagging indicators.

The basic function of the MACD Forex indicator is to discover new trends and to help identify the end of current trends. There are various ways to gauge the signals generated by MACD, and many traders use their own unique settings and methods around this trading indicator.

Understanding the MACD Indicator

The MACD indicator is typically placed at the bottom of the trading chart, in a separate window, beneath the price chart. The Moving Average Convergence Divergence is a relatively easy-to-use tool, however, it is crucial to understand it fully before attempting to trade using its signals. Let’s take a close look at the structure of the MACD indicator and its default settings.

MACD Structure

The MACD indicator consists of three components. There are two lines and a histogram. Let’s now discuss each of these separately:

  • MACD Line – The MACD line is the faster line on the indicator. Since it reacts faster it and is more sensitive, it generally moves above and below the second line of the indicator.
  • MACD Signal Line – The MACD signal line is the second line of the MACD indicator. It is called a signal line, because it generates the basic MACD signals. Since the line is slower, it gets frequently breached by the faster MACD line.
  • MACD Histogram – The MACD histogram simply represents the difference between the MACD line and the signal line. The bigger the gap between the lines, the higher the bars that the MACD histogram will display.

Below you will see an example of the MACD indicator:

This is a zoomed image of the MACD indicator. The blue line is the MACD line. The red line is the signal line. As you see, the MACD line is faster and it often breaks the signal line. The gray bars are the histogram, which move in harmony with the distance between the two lines of the indicator.

MACD Settings

On most trading platforms, the MACD indicator typically comes with the default parameters 26, 12, and 9. We will interpret the meaning of these three numbers and how they apply to the structure of the indicator.

The “12” and “26” are mutually related. These two numbers concern the calculation of the faster MACD line. The structure of the MACD line comes with calculating a 12-period Exponential Moving Average on the price action and then subtracting a 26-period Exponential Moving Average from the result. The difference between the two EMAs gives you the value of the faster line.

The “9” comes from the calculation of the slower line a.k.a. the signal line. This line is a product of a 9-period Exponential Moving Average plotted on the faster MACD line. This is why the signal line is slower than the MACD line – because it is the smoother version of the MACD line.

MACD Signals

Although the MACD indicator consists only of three components (the two lines and the histogram) it can provide a myriad of signals. We recognize six basic signals of the MACD and now we will discuss each of these separately.

MACD Crossovers

The MACD crossovers involve the interaction between the two MACD lines. The MACD line is faster than the signal line, and it will typically cross above and below the slower signal line.

  • Bullish MACD Crossover – We have a bullish MACD crossover when the MACD line crosses the slower signal line in the bullish direction. This action generates a bullish signal on the chart, which implies that the price might start an increase.
  • Bearish MACD Crossover – The bearish MACD crossover is opposite to the bullish MACD crossover. When the MACD line crosses the signal line in the bearish direction, we have a bearish crossover. This hints that the price action might be entering a bearish move.TO BE CONTINUE…

A Simple MACD Strategy

It can be extremely difficult for new traders to finalize a trading strategy for trading the Forex market. The options for market entry are virtually unlimited, and it is often good to have a simple strategy on standby. Today we are going to review the basics of a simple MACD strategy, based on finding the trend then utilizing an indicator for execution.

So let’s get started!

Find the Trend

The first step to trading any successful trend based strategy is to find the trend! One of easiest ways to find the trend is through the drawing of a trendline. Traders can connect the lows in an uptrend and find a clear area of where price is supported. Below we can find an ascending trendline on the EURCAD.

Given the information above, traders should look to buy the EURCAD as long as it remains supported. If the trend continues, expectations are that price will remain above support and new highs will be created.

Learn Forex –EURCAD Trendline

MACD Entry

Once a trendline is drawn, and a trading bias has been established traders will begin looking for areas to enter new positions. One of the easiest ways to find a technical trigger is through the use of an indicator. Below we can see the EURCAD daily graph, this time with MACD added. Since we have identified the EURCAD in an uptrend traders will look to buy when the MACD when momentum returns to the underlying currency pair. This occurs whenthe Red MACD line to crossover the Blue Signal line, prior to executing their orders.

Below you will find several examples of past MACD crossoverson the EURCAD. Note how only buy positions are to be taken on bullish crossovers as the uptrend continues.

Learn Forex – EURUSD & CCI

Manage Risk

When trading markets, there will always be a degree of risk. When trading trends, it is important to know that they will eventually come to an end. In an uptrend like the EURCAD, traders may place stops under the established line of trendline support. In the event that price breaks under support, traders will wish to exit any existing positions and look for other opportunities.

—Written by Walker England, Trading Instructor

To contact Walker, email instructor@dailyfx.com. Follow me on Twitter @WEnglandFX.

To be added to Walker’s e-mail distribution list, CLICK HERE and enter in your email information.

Don’t Trade Based on MACD Divergence Until You Read This

The MACD–moving average convergence divergence–indicator is popular among traders and analysts, yet few really understand it. Divergence on the MACD is one of the ways the indicator is used, and takes two forms. When the price of an asset is moving one direction and the MACD in the other, that’s divergence. This type of signal is supposed to warn of a reversal, but as discussed below, the signal is random and often inaccurate.

Another type of divergence is when the price makes a new high (or new low) but the MACD doesn’t. Traditionally this indicates the price is losing momentum and prime pickings for a reversal. This also tends to be a very poor trading signal.

By understanding the MACD a little more, you’ll understand how it actually works so you don’t get fooled by its common false signals or lack of signals (when the price turns but the MACD doesn’t provide warning).

Problems With Divergence After a Sharp Move

Without going into the math of the indicator, monitoring the MACD in relation to price action reveals a few problems which could affect the MACD-divergence trader.

Note: If trading with a technical indicator, any indicator, be aware of exactly how it functions, so you know all of its drawbacks and benefits.

Divergence will almost always occur right after a sharp price move higher (or lower). Determining whether a price move is sharp (or slow, or large or small) requires looking at the velocity and magnitude of the price moves around it. The price momentum can’t continue forever so as soon as the price begins to level off, the MACD will diverge (for example, go up, even if the price is still dropping).

After a strong price rally MACD divergence isn’t useful. By dropping, while the price continues to move higher or move sideways, the MACD is showing momentum has slowed…but it doesn’t indicate a reversal.

In the attached chart (click here for larger version) the EURUSD is falling, yet the MACD is rising. Had a trader assumed that the rising MACD was a positive sign, they may have exited their short trade, missing out on additional profit. Or they may have taken a long trade, even though the price action showed a significant downtrend and no signs of a reversal (no higher swing highs or higher swing lows to indicate an end to the downtrend).

That doesn’t mean divergence can’t or won’t signal the occasional reversal, but it must be taken with a grain of salt after a big move. Since divergence occurs after almost every big move, and most big moves aren’t immediately reversed right after, if you assume that divergence (in this case) means a reversal is coming, you could get yourself into a lot of losing trades.

Problems with Divergence Between MACD Highs (or Lows)

Traders also compare prior highs on the MACD with current highs, or prior lows with current lows. For example, if the price moves above a prior high, traders will watch for the MACD to also move above its prior high. If it doesn’t, that’s a divergence–a traditional warning signal of a reversal.

This is also fallible, and related to the problem discussed above. A lower MACD high simply shows the price didn’t have the same velocity it had last time it moved higher (it may have moved less, or it may have moved slower), but that doesn’t indicate a reversal.

As discussed above, a sharp price move will cause a large move in the MACD, larger than what is caused by slower price moves.

An asset can march higher or lower, slowly, for very long periods of time. If this occurs after a steeper move (more distance covered in less time) then the MACD will show divergence for much of the time the price is slowly (relative to the prior sharp move) marching higher.

If a trader assumes a lower MACD high means the price will reverse, a valuable opportunity may be missed to stay long and collect more profit from the slow(er) march higher. Or worse, the trader may take a short position into a strong uptrend, with little evidence to support the trade except an indicator which isn’t useful in this situation (see: Probabilities in Trading).

The attached chart (click here for larger version) shows a downtrend in APPL stock. The downtrend is caused by sharp downward moves, followed by slower downward moves. The sharp price moves always cause much bigger downdrafts in the MACD than slower price moves. This results in divergence when the next price wave isn’t as sharp, but in no way indicates a reversal. MACD divergence was present this whole day, yet the price dropped all day. If monitoring divergence, an entire of day of profits on the downside would have been missed.

Another problem with watching for this type of divergence is that it often isn’t present when an actual price reversal occurs. Therefore, we have an indicator which provides many false signals (divergence occurs but price doesn’t reverse), but also fails to provide signals on many actual price reversals (price reverses when there is no divergence).

Ultimate Guide to the MACD Indicator

Technical analysis indicators condense price information, providing analytical insight and trading signals which may not be obvious on a stock’s price chart. The Moving-Average-Convergence-Divergence (MACD) indicator fluctuates above and below zero, highlighting both the momentum and trend direction of a stock. Utilizing the MACD effectively requires understanding how it works, its functions and applications, as well as its limitations.

What is the MACD Indicator?

Gerald Appel developed the MACD in the 1970s, and it is one of the most popular indicators in use today. Traders use the MACD for determining trend direction, momentum and potential reversals. It is used to confirm trades based on other strategies, but it also provides its own trade signals.

Figure 1 shows the MACD applied to a daily chart of Apple (AAPL) stock.

Two lines compose the MACD: the MACD line and Signal line. These lines move together, except the MACD moves faster as the Signal line is a moving average of the MACD line.

The MACD Histogram that oscillates above and below zero shows the extent to which the MACD line is above or below signal line. The histogram provides a short-term view on recent momentum and direction. When the histogram is above zero, recent movement has been higher; below zero and the recent momentum was down. The greater the histogram value the greater the momentum of the recent move.

The Histogram is not always shown as part of the MACD indicator as many traders prefer to focus on the how the two lines (MACD and Signal) are interacting. These two lines are the source of most MACD strategies and price analysis.

The MACD is calculated as follows:

MACD Line = 12day EMA – 26day EMA
Signal Line = 9day EMA of MACD Line

EMA stands for exponential moving average.

The MACD Histogram is the MACD Line – Signal Line

Trading with the MACD Indicator

There are three primary uses for the MACD indicator, each offering advantages and disadvantages. Combing all three functions will help eliminate some losing MACD trade signals, as will using the MACD in conjunction with other indicators and price analysis.

Zero-Line Crossovers

Moves across the zero line on the indicator represent times when the 12day EMA is crossing the 26day EMA. When the MACD crosses the zero line from below, a new uptrend may be emerging. When the MACD crosses the zero line from above a new downtrend may be emerging.

Figure 2 shows several zero line crossovers in International Business Machines (IBM).

The strategy is to buy when the MACD crosses above the zero line, and sell (or take short positions) when the MACD line (black) crosses below the zero line. During choppy conditions this results in losing trades, and is profitable when strong trends emerge.

Hold long trades until the MACD crosses back below the zero line. Hold short trades until the MACD crosses above the zero line. This strategy is very basic and doesn’t have a stop loss, which means risk is not controlled. To utilize this strategy, traders need to implement their own form of risk control (see next section)

Zero line crossovers also confirm trends. When the MACD line is above zero it helps confirm uptrends and other strategies that indicate taking long positions. Below zero, the MACD confirms downtrends and taking short trades based on other strategies.

Signal Line Crossovers

Signal line crossovers provide better timing, and are preferred by most traders to zero-line crossovers.

With this method, a buy signal occurs when the MACD line crosses above the Signal line.

A sell (short) signal occurs when the MACD line crosses below the Signal line. Figure 3 shows IBM again, this time using Signal line crossovers. The buy and sell signals occur earlier in the price move than zero-line crossovers, potentially providing better entry and exit prices.

Since the MACD is an indicator, and not a trading system, there is no stop loss. For buy signals a stop can be placed below a recent low, and for short signals a stop can be placed above the recent high.

There are no built in targets, so trades are held until a crossover in the opposite direction occurs. New trades can then be initiated in the new crossover direction.

The downfall of this strategy is that it can result in “whipsaw” trades, when the MACD and Signal lines cross back and forth in a short amount time.

One way to avoid some whipsaws is to only take trades in the direction of the long-term trend. If the trend is up, only take a buy signals, and exit when the MACD line crosses back below the Signal Line.

Divergence

Bearish divergence is when the price is making new highs, but the MACD isn’t. It shows that momentum has slowed, and a reversal could be forthcoming.

Bullish divergence is when the price is making new lows, but the MACD isn’t. It shows selling pressure has slowed, and a reversal higher could be around the corner.

Until divergence is confirmed by an actual turnaround in price, don’t base trades simply on divergence. A stock can continue to rise (fall) for a long time even while bearish (bullish) divergence is occurring.