MACD Crossover strategy

All MACD lines and their crossing
On a typical chart the MACD shows two lines (the MACD line and the Signal line), as well as the zero line. They cross each other often enough to give us plenty of options for building various MACD crossover trend following strategies. Some of them are the classics of quantitative trading.

What MACD really means
MACD is calculated using two exponential moving averages and its value equals the value of the shorter period (faster) EMA less the value of the longer period (slower) EMA. See the basics of MACD.

Therefore, the MACD line itself always represents the distance between the two moving averages. When MACD line crosses the zero line, it is exactly at the same time when the faster EMA crosses the slower EMA.

1. The very basic: trading on MACD line crossing the zero line
The simplest strategy you can think of with MACD is trading when the MACD line crosses the zero line. When the MACD line crosses above zero, you buy. When it crosses below zero, you sell.

Because MACD is in fact a distance between two moving averages, this trading strategy is exactly the same as trading crossovers of two moving averages. There is zero difference. While it is not impossible to make such a simple trend following strategy work even in these days, it is quite unlikely that you will have great success with trading EMA crossovers (or MACD zero line crossovers) on a standalone basis. The many losing trades in non-trending markets will get you.

2. Signal line crossing the zero line
An alternative is using the Signal line instead of the MACD line and enter trades when it crosses the zero line. Now what exactly is the MACD Signal line? It is a smoothed (lagged) version of the MACD line, as it is calculated as an EMA of the MACD.

Besides being more lagged, this approach is not much different from the previous one. Smoothing the MACD line using the Signal line eliminates some losing crossovers, but creates a few others from the previously winning ones. Furthermore, it gets you into good trends even later. Conclusions are the same as with basic MACD zero line crossovers: very hard to make it work without additional improvements.

3. MACD zero line crossovers with waiting for confirmation
Alternatively you can improve the MACD zero line crossover strategy by waiting for the first correction after the MACD has crossed the zero line. While sometimes this correction will enable you to get a better entry price and smaller risk, in some other cases the first correction never comes and you won’t get into the position – unfortunately these are usually the cases when the pure MACD zero line crossover would have been profitable. Sometimes the first correction will evolve into a trend reversal and you will lose.

However, waiting for the first correction can work and can improve your strategy. Many people use this idea and not only with MACD. It is quite common with moving averages, when traders wait until price touches the moving average and then enter a trade in the direction of the trend. It only needs some testing and fine tuning.

4. MACD line crossing the Signal line
Finally after going through some really simple approaches we are getting to probably the most popular and classic way to trade the MACD – the crossover of the two lines.

You enter a long position when the MACD line crosses above the Signal line. This situation signals that the bearish momentum is probably over and there is a good chance of price moving up. On the contrary, when the MACD line crosses below the Signal line, it is a sell signal.

Of course, being classic and popular doesn’t make this approach a universal winner. The advantage over the simple MACD crossovers mentioned above is that it doesn’t wait for the MACD to cross the zero line and therefore there is less lag behind the price – sometimes the delay is so small that you can even question this trading approach being trend following. You usually act on just a little slowdown of the momentum in the original trend, which makes the two lines cross. Sometimes this makes you catch a great new trend in the very beginning, while sometimes market resumes the original trend and you are stopped out (yes, using stop-losses is highly recommended with all MACD strategies).

Trend following with MACD: summary
Think of MACD crossovers as trend following strategies – with all their strengths and weaknesses.
Don’t expect the most simple and obvious methods to bring you great results on a standalone basis (possible – yes; probable – not that much). Markets are competitive.
Try to improve or filter the simple MACD crossover system with another strong idea. You can wait to enter on the first correction after you have identified a new trend using MACD. Or you may find ways to define non-trending market and avoid taking MACD signals under these circumstances.

The MACD and Bollinger Band Trading Strategy For Binary Options

I think it is a given that most free binary options signal service providers are really an affiliate marketing scheme. There really is no other reason for an SSP to provide free signals unless they want you to buy something, sign up with one of their recommended brokers or harass your friends into joining. Websites providing free binary options strategies are very similar but tend to be less scammy than the SSP’s. I know, I post strategies on several websites including my own. My goal is always to provided real, useful, information for traders. This is not the case with the strategy I will be reviewing here today.

Whenever I am reviewing a strategy I also have to look into who is presenting it. Believe it or not it can make a big difference. This strategy is provided by BinaryStrategy.EU, a website dedicated to binary options strategies and broker reviews. After thoroughly checking into the strategy and website I am more convinced than ever that this is nothing more than an SEO scam set up by someone who doesn’t know much about trading and probably had to use a translator program to get the page in English.

The MACD And Bollinger Band Strategy

I like MACD and use it every day in my trading and analysis. It is one of the best and most reliable indicators I know and when added to another tool such as support/resistance lines or Bollinger Bands as is the case here today can be highly effective for binary options traders. This is the MACD And Bollinger Band Trading Strategy For Binary Options. It is designed for trading 60 Second options and uses MACD, Bollinger Bands, Candlestick Charts and a new indicator I have never heard of, the Mobile Media. It is good for trading in either direction and comes highly recommended by the author, who is not named. Signals are derived from a MACD crossover that occurs at either extreme of the Bollinger Bands. In the given example a bearish candlestick is accompanied by a bearish MACD crossover while prices are at the upper range of the B Bands. In this case a 60 Second Put option is indicated. If the signal were a bullish crossover occurring at or near the lower B Band then a call would be indicated.

Benefits Of Using This Strategy

There are some benefits to using this strategy, but not enough. First, it uses MACD. I like, know and trust MACD for analysis and trading signals. I can recommend it to newbies and experienced alike. It also uses Bollinger Bands. B Bands, and any enveloping indicator, are great tools for traders as well. Other benefits include it’s usefulness as it can be used to trade in either direction and the well defined entry points. The thing is, these are not enough to outweigh the risks involved.

Risks Of Using This Strategy

There are too many risks to using this strategy to name in one article. First and foremost, it is based on 60 Second binary options. These are the riskiest of all binary options types and not one that I would recommend to anyone. Second, it makes no attempt to determine the underlying trend or to weed out whipsaws and false signals. Utilizing trend analysis would help to alleviate false signals and improve the strategies success rate, which I will point out is not listed on the website. False signals are a real problem for this system. The chart provided by the author points out several profitable entries but overlooks a number of false signals that would more than off set the good ones. Adding risk to this strategy is the use of a new indicator, I think, called the Mobile Media. When I looked I could find no mention of this indicator anywhere on the website or elsewhere on the web. In fact, I think it is possible the author is referring to the moving average used to smooth the MACD indicator.

binarystrategyDOTEU

My Conclusions On The MACD And Bollinger Band Strategy For Binary Options

I can find no real value to this strategy. If you use it you will lose your money. It is nothing more than an SEO page aimed at getting you, my trading brothers and sisters, to deposit money with 24Option. The good news is that this web site is indeed a third party affiliate and not operated by 24Options itself. 24Option is a reputable broker. The bad news is that it is an affiliate marketing scheme and this is why.  The author recommends you practice in a demo account….a demo account you can only get by making the minimum deposit with 24Option and thereby producing an affiliate bonus for BinaryStrategy.eu. When you go on the site you will see for your self just how little of value there is. What makes it worse is the rampant use of improper vocabulary throughout this strategy and others I scanned while researching this article.

MACD Histogram Strategy

MACD Histogram Strategy – The Moving Average Convergence Divergence Histogram can assist with taking trades in the direction of the trend.

MACD HISTOGRAM

Created by Thomas Aspray in 1986, the MACD Histogram is a visual indicator of the difference between the MACD line and the Signal line, which is a default 9 period ema of the MACD line. The histogram is an oscillator that moves above and below the zero line, just as the MACD line does.

Keep in mind when using this oscillator, that it takes four mathematical steps from price itself to create the 4th derivative, the histogram: Price => two ema averages => MACD line = Signal line => Histogram. Which means it

lags price quite a bit. But like all derivatives of price, it’s much smoother than price itself.

COMPONENTS

5 minute Chart

MACD Histogram (setting: 12-26-9)

50 SMA of Price

MACD HISTOGRAM STRATEGY SIGNALS

This is a very easy to follow method of day trading stocks that are in a clearly identified trend. The 50 sma is used here to determine trend, and again there’s nothing magical about this number 50. Nor the fact that it’s a simple moving average.

If you did a side by side comparison of a simple or exponential or weighted or any other moving average for this strategy, I’m sure you’d find that there are time periods that each would excel. Same for the amount of periods used.

Newbies tend to be very attentive to exact numbers for indicator strategies. It’s not important. If a concept is going to work, it’s going to work over a range of numbers, not just a single number for each variable.

Don’t get hung up on those kinds of details. But, of course, like I said before, don’t take my word for it, or anybody else’s. Do your own testing to confirm any concept or idea.


Buy Setup: 50 sma is rising

Buy Trigger: MACD Histogram is under zero and rising. Stop can be placed under the entry candle.

Exit: Scalp, profit target or trailing stop


Short Setup: 50 sma is falling

Short Trigger: MACD Histogram is above zero and falling. Stop can be placed above the entry candle.

Exit: Scalp, profit target or trailing stop


EXAMPLE CHART 1

EXAMPLE CHART 2

What is MACD Indicator in Forex

The MACD is one of the most used Forex indicators for technical analysis. The indicator consists of two lines on an area and a histogram.

MACD Trading Indicator

Above you see a zoom-in image of the MACD Forex indicator that shows the way it will look like at the bottom of your chart.

The MACD indicator trading strategy involves making trading decisions based on signals that come from the indicator. The indicator is helpful in recognizing potential price increases and decreases. Traders use the MACD indicator Forex tool to support their Forex strategy and to open trades based on signals.

What is the MACD Definition

MACD is an abbreviation of Moving Average Convergence Divergence. The indicator was developed in 1970 by Gerald Appel to signalize changes in the direction, momentum and the strength of the Forex trends. MACD is a lagging indicator, which means that its signals appear after the event has begun on the chart. In this relation, the tool has trend-confirming character.

Default MACD Indicator Settings for Day Trading

The default MACD settings suggest the usage of two lines and a histogram placed on an area. We will go through each of these elements explaining the Moving Average Convergence Divergence formula. But let’s first have a quick look at the three components of the instrument:

MACD indicator settings

The blue line is called an MACD Line. The red line is the Signal Line. And the bars in the middle of the indicator represent a histogram.

MACD Line Calculation

The most important component of the indicator is the MACD line. This is the faster line of the indicator. The calculation of this line involves two Exponential Moving Averages – a 12-period EMA and a 26-period EMA. The MACD line represents the difference between the two EMAs:

MACD line = 12 EMA – 26 EMA

MACD Signal Line Calculation

The slower line of the MACD indicator calculation is called a signal line. It involves the usage of another Exponential Moving Average. The truth is that the MACD signal line is a 9-period EMA of the MACD line.

Signal Line = 9-period EMA of MACD line

MACD Histogram Explained

MACD histogram calculation is a visualized difference between the two lines of the indicator. This means that you need to subtract the two lines to get the value of the MACD histogram.

MACD Histogram = MACD Line – Signal Line

How to Read MACD Indicator

Now let’s discuss the general MACD indicator how-to-use guide. The tool involves three major signal groups, and we will now go through each one of them.

MACD Crossover

The MACD crossover is the most popular signal related to the indicator. It involves the intersection of the two lines. In this relation, we recognize two types of MACD crossover:

Bullish MACD Crossover – It comes when the MACD line crosses the Signal Line in the bullish direction. This signal alerts that the price of the Forex pair is likely to increase.

Bearish MACD Crossover – It comes when the MACD line crosses the Signal Line in a bearish direction. The bearish MACD cross indicates that the price of the Forex pair is likely to decrease.

MACD Divergence

The MACD analysis involves the recognition of divergence as well. In this relation, there are two types of MACD divergence in Forex – bullish and bearish divergence.

Bullish MACD Divergence – When the bottoms of the price action are decreasing, but the bottoms of the MACD are increasing, we have a bullish divergence. It signalizes that the Forex pair is about to do a bullish run.

Bearish MACD Divergence – When the tops of the price action are increasing, while the tops of the MACD are decreasing, we have a bearish divergence. It indicates that the price might drop on the chart.

Now I will show you an example of a trade I did with the MACD indicator. The video below shows a bullish MACD divergence that I used to open a long trade with the USD/CAD Forex pair. Also, the video shows how to successfully combine the Forex MACD with price action rules. The video includes signals from a Falling Wedge chart pattern.

Gold trading strategy using simple MACD with scary results

This is a very simple yet effective MACD momentum trading strategy for GDXJ (Jr. Gold Miners ETF). Apply the MACD indicator with the classic 12/26/9 setting on GDXJ at the 30-minute interval. Go long when MACD issues a buy signal and go short when MACD issues a sell signal. Take profit = +25%, stop loss = -5%. Got pretty decent results off such a basic strategy already so I was wondering what my fellow Q wizards can do to spice this thing up even more!

MACD Moving Average Crossovers

The primary method of interpreting the MACD is with moving average crossovers. When the shorter-term 12-period exponential moving average (EMA) crosses over the longer-term 26-period EMA a potential buy signal is generated; this is seen on the Nasdaq 100 exchange traded fund (QQQQ) chart below with the two purple lines.

Remember that the MACD line (the blue line) is created from the 12-period and 26-period EMA. Consequently:

  1. When the shorter-term 12-period EMA crosses above the longer-term 26-period EMA, the MACD line crosses above the Zero line.
  2. When the 12-period EMA crosses below the 26-period EMA, the MACD line crosses below the Zero line.

Moving Average Crossover Potential Buy Signal

A possible buy signal is generated when the MACD (blue line) crosses above the zero line.

Moving Average Crossover Potential Sell Signal

When the MACD crosses below the zero line, then a possible sell signal is generated.

The prior potential buy and sell signals might get a person into a trade later in the move of a stock or future. Another potential buy and sell signal is shown in the graph below of the Nasdaq 100 exchange traded fund QQQQ:

Most Common MACD Potential Buy and Sell Signals

MACD Potential Buy Signal

A potential buy signal is generated when the MACD (blue line) crosses above the MACD Signal Line (red line).

MACD Potential Sell Signal

Similarly, when the MACD crosses below the MACD Signal Line a possible sell signal is generated.

The MACD moving average crossover is one of many ways to interpret the MACD technical indicator. Using the MACD histogram and MACD divergence warnings are two other methods of using the MACD

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.