MACD Forex Strategi
Welcome to the 4 Hour MACD Forex Strategy. This
strategy is aimed at simplicity as well as high probability trades. I have been
in the equity market for almost ten years now and in the forex market for two
years. I learned very early that forex trading is not for the shaky ones. One
must have a tested and definite trading strategy as well as well organized
discipline to follow the strategy and execute the plan as to the letter. One
must be exact and precise.
Therefore I paper traded for almost two years and
read everything I could lay my hands on. I bought books and courses. I attend a
5 day live web seminar. All this did not help me at all as it did not fit my
style of personality and I just did not seem to connect with all this different
strategies. Over two years of watching the graphs with different indicators,
moving averages etc. I started to get a feeling for the movement and motion of
the market especially the EurUsd around certain moving averages.
It wasn’t till late last year that I discover a setting
with the MACD that gives easy to read signals on a regular basis on a 4 hour
timeframe. I like the 4 hour timeframe as one are not glued to the screen full
time.
If you look at FIG 1 below you will
see that there were 14 signals over a period of 5 weeks. Within that period of
FIG 1 the signals given were pretty good. There are times when some signals
does not produce positive results. I then had to work on a filter system to
only let me take the best ones. I found that the MACD when moving in a certain
way produces a 95% accuracy. I will show you later how the high probability
trades look like.
In FIG 1 the signals are shown and FIG
2 shows that an entry is made after the 4 hour bar has closed and at
the opening of the next bar.
In FIG 3 another 19 deals were shown
of which the last one was not finished yet so out of a total of 18 trades 5
were wrong and 13 were right.
As it is a 4 hour strategy it means sometimes
setting the alarm clock to catch an entry in the early morning hours. What
makes it nice is that one will know after the close of a 4 hour bar whether the
next 4 hour bar might close as a signal by just following the MACD. Therefore
one can set an alarm at that time.
Have a look at FIG 1 to 3.
Disclaimer :
As trading in the Forex market is very risky, the
reader if going beyond this point and applying the concepts and methods
describing in this document do so on his or her own will and risk. The writer
and or anyone involved in the compiling of this document will not be held responsible
for any losses incurred by using the methods described in this document as no
money management nor stoploss levels are discussed as it vary from trader to
trader according to there own risk and capital profiles.
Figure 1
Figure 3
This was just to see and get a feeling for the
graphs. Let us start to set-up our charts.
You will see later on when dealing with the
different MACD signals that in the examples used I did not marked every signal.
There are signals not marked and the reason being that the intention was to let
you see the different type of signals and not to indicate everyone.
THE MACD ON ITS OWN IS NOT ENOUGH OF A TRADING
SYSTEM AND OR INDICATOR TO BE SUCCESSFUL USING IT ON ITS OWN
Therefore to understand the system as a whole you
need to go to Page289 from Post 4335 and study the 13 Lessons given. Study the Lessons
on Market Rhythm by heart as that is the heart of this system. It will let you
filter the trades that can hurt you.
Moving Averages :
First of all are the moving Averages that we are going to use :
- 365 Exponential Moving Average (365EMA)
- 200 Simple Moving (200SMA)
- 89 Simple Moving Average (89SMA)
- 21 Exponential Moving Average (21EMA)
- 8 Exponential Moving Average (8EMA)
MACD setting at :
- Fast EMA 5
- Slow EMA 13
- MACD EMA 1
Three sets of horizontal lines above and below zero should be
drawn on the MACD window at levels as well as one on zero.
- Level +0.0015
- Level +0.0030
- Level +0.0045
- Level –0.0015
- Level –0.0030
- Level –0.0045
Your Graph should look
like this : (Choose
your own colour and styles)
The MACD moves in certain patterns that when
recognized can be very profitable trades. Let me show you the very important
ones first. By not following every signal but only the ones that gives high
probability trades through certain MACD patterns serves as a filter. The ones
not familiar are not taken. This is the filter.
Countertrend
trades can be dangerous as it involves going against the trend. When going
countertrend determine the resistance.
This pattern comes very regular especially A and D as the MACD
has moved beyond the 0.0045 level and are due for a correction and or trend
reversal. B and C are trend continuing patterns and are entered in the
direction of the trend. Red circles indicates entry signal
and entry is made on the opening of the next bar.
Round tops and bottoms are for sure. Just be
careful when within the first zone 0.0000 to 0.0015 above or below the zero. I
like the rounding to be formed over at least 5 bars.
This was a difficult month (Jan 2007)up to now but
already 190 Pips up and a great move is coming as the price is within a range
for almost 8 days. Lets see if that will happen.
Up to now
I have only concentrated to give the signal on the MACD window so that you will
be able to recognize it. It is easy to see the formation after it has formed.
It takes a bit of practice to recognize it while it is forming. Lets look at a
couple just to see how they look when the trade is entered.
Let us
look at the graph above. See how price levels play a roll in the support and
resistance of the price movement. Say we entered the trade at Entry above. Our
first profit target will be around our fast moving averages (8EMA and 21EMA).
Our second profit target will be around the slow moving averages(89SMA
and365EMA). Our third profit target will be at price level 1.2100 etc etc etc.
This is
how you plan your trade in advance to take partial profits till you complete
the trade. Should there be a moving average or price level nearby and below
your entry level you must take note that the price might go and test them. So
your stoploss must be aware of that.
Again I ask you to study the movement of the price
around the moving averages. When the price are above the 89SMA the trend is
normally up and visa versa. After the price crosses the 89SMA it tends to
pullback to the 21EMA before it carry on its direction if it is a trend
direction change otherwise it tend to test the 89SMA again and then it runs
over and across the 89SMA till it finds direction and then it pulls back to the
21EMA before proceeding on its path.
This is Market Rythm
Here are a
live trade I did for someone in explaining how I trade. This is actual e-mails
that I did send. 25 January 2007 21:00 (GMT+2)
Hi...
I took it with 30 pip stoploss and
hope I can add to the Gbp one earlier this week.
Greetings
The MACD pulled back to the Zero line and then
closes lower which indicate a down move.
“Got entry at 1.2955 and has set
stoploss at breakeven at 1.2955 when price did hit 1.2935. I am scared for a
false breakout below support but now the price can turnaround as I have a free
ride.”
“Took
50% profit at 1.2920 and set other half stoploss at 1.2935”
“Hi
Amazing how it found
support with Fibonacci. I wanted to do this trade with you as it developed so
that you can see how I go about. I just had a feeling that the price is not
going to go down to 1.2900 straight away so I applied fibonacci
as there was no other indicator between the entry price and 1.2900. One has to
listen to that little voice inside as well. I was stopped out on the other have
at 1.2935 so the total gain was 35 pips on 50% and 20 pips on the other 50% for
a total of 27.5 pips on full lot.
Not bad for an hour work. Greetings”
This trade however was a bit risky as it was a
breakout trade after ten days consolidation testing a trendline angling
upwards. One has to evaluate the risk not only in terms of pips but also in
terms of strategy and chart pattern. After a breakout the price very often
turns back to test the breakout level and then that level becomes either
support or resistance in this case it becomes Eur resistance.
Stoploss have to be inside the breakout
otherwise it can be triggered and then sometimes it can be very big before
entry signal is given by the MACD.
Here is
what I normally do when the MACD shows a signal but the stoploss are to big in
relation to my capital or what I am comfortable with. I enter the trade in
three stages with my stoploss set at the same level.
You will notice that not all signals was taken.
Sometimes I were already in a trade. I did not actually trade all these trades
live. This was done on a backtesting scenario.
I stopped counting the pips for
the April 2006 testing as it completely convinced me of the success of this
method. I randomly tested it using previous years and the results were amazing.
Average of 300+ pips per month and then I only trade the trades that gives
signals at these times 17:00, 21:00 and 01:00 (GMT +2). It gives between 8-10
deals per month using the mentioned timeframes.. (I use Metatrader and data
supply by MIG.). Due to working hours and the fact that that I don’t have
internet access during working hours I can only trade those hours.
If you use patterns in the MACD that occur regular that gives
results and use them every time they occur you will most definitely make money.
For newcomers I suggest that you trade only Trend Continuous
signals as well as RT and RB that occur above the 45Level Hor lines as that
will give you a positive start. Less pips but mostly successful trades.
I haven’t discuss nor used
trendlines so far in this document and when you add them it will most
definitely helps you in defining your exit levels. The entry level are
determine by the MACD but the exit or profit levels is determine by support and
resistance levels. I use the moving averages as described earlier as well as
Fibonacci levels and then most definitely trendlines and price levels. I
normally take the daily graph and draw the trendlines according to it and then
go to the 4 hour graph. I make them nice and thick so that I can see them. Then
I draw the different price levels such as 1.2900, 1.3000, 1.3100 etc. It is
amazing to see how the price find support and or resistance at these levels.
I hope
that this document will help you on your way to financial independents.
YOU MUST STUDY THE MARKET RHYTHM LESSONS AS THAT
WILL PROVIDE YOU WITH THE RIGHT KNOWLEDGE
Edited 2007/08/05
You also
must read through the whole thread to obtain the right mindset. This is not a
easy 1+2+3=4 type of system as it takes the Market rhythm into account and a
study of these rhythm are essential to survive.
I could not post it all at once due to size limitations and
the fact that everything was not documented when this document was placed. As
the thread developed a lot of questions was asked and answered so it is of
importance to go through the whole thread.
Don’t
trade very MACD signal . Make sure it is in harmony with market rhythm
and Risk to reward Ratio is bigger than one (R:R>1). Trade only 2-3 pairs at
a time. I focus on EurUsd, GbpUsd and EurJpy(risky) and lately I added the
UsdChf.
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