In the event you’re looking to get a trend following plan which may turn around your trading, now ‘s your lucky time. The MACD Trend Following Strategy, as its name implies, is among the very best trend following ways of make use of. This tactic is comparable to thetrend following strategy we developed before.
Even in the event that you’re wrong about a trade, among the very crucial elements of fashion following strategies would be that one can often limit your losses. That is only because, fundamentally, industry will undo and restart the tendency. However, more to the point, it optimizes your potential benefit at exactly the exact same moment. This tactic is contained within our complete collection of the very best trading strategies accumulated online.
Our team only at Dfxindo.com make an effort to supply you with all the ideal trading strategies.
The MACD Trend Following Strategy works better on the greater timeframes, just like the 4-h graph or perhaps the daily graph. Consequently, in the event you’re a swing trader, here could be an excellent way for youpersonally. We developed this new tendency following technique to clearly show the world the way to correctly make use of the MACD index. Our objective is to demonstrate how true this tool is in predicting market turning points.
Now, in the event you’re a day trader and overlook ‘t like holding positions overnight, don’t stress. We’ve got your back. Our favourite stock investing plan, Day Trading Price Action- Simple Price Action Strategy, has brought plenty of attention from the trading area.
Now, let’s go ahead into this unbelievable MACD plan we developed for the traders. We’ll explain to you how you can utilize MACD effortlessly, exactly what a legitimate fad index appears like, and also a superb profit index. Now you ‘ll also know why we presume the MACD indicator could be your ideal trend after index. This is just another strategy called, The PPG Forex Trading Strategy.
What’s the MACD index employed within this MACD plan?
The attractiveness of this MACD Trend Following Strategy is that it merely requires the utilization of one particular tool: the MACD index. Incidentally, that really is on the list of very popular Forex indicators.
Without further ado, allow ‘s move Right to the stage and:
- Define what could be your MACD index.
- How the MACD indicator works.
- What MACD index setting touse.
The MACD is still perhaps one of the strongest fashion after and momentum index. The MACD is just a widely used technical index. The acronym stands for Moving Average Convergence Divergence.
In simple terms, a trend following index can help one to ascertain the over all management of the marketplace. When it’s upward (bullish divergence) or downward (bearish divergence). On the flip side, a momentum index attempts to ascertain the rate of this tendency. Put them together and you’ve got an ideal combination to get a trend following plan.
A picture is worth one million words. Here is the way the classical MACD index looks like about a graph:
The MACD will give an earlier indication an OLD fad is all about to get rid of and also a NEW fad is going to get started. The MACD manipulates its moving averages at an extremely smart manner. It can indicate changes in tendency much closer to once they actually occur. Please take a good peek at the graph example below to find that the ability of the MACD indicator.
So, how can this work?
Well, the MACD’s moving-averages and histograms (see graph below) derive from the purchase price graph. They’re calculated with a formula, that adds more weight to one of the latest price moves information.
Remember? Price is still king!
Our popularPrice Action Pin Bar Trading Strategy can be actually a fantastic introduction to exactly what a more pure cost action plan should seem to be. It can also be utilised together with this MACD Trend Following Strategy for a greater success rate.
What about the index setting?
The favorite preferences for that MACD index are the default option settings.
Let’s move ahead to the absolute most significant part this short article: the most buy/sell rules of the MACD Trend Following Strategy.
Now, before we proceed any farther, please have a slice of paper and a pencil and note the rules down.
Let’s Get Going…
Note** Some reported us who the Default MACD index on MT4 doesn’t need those 2 traces just like you find in our case. You can find a variant for your own plan here on Forex Factory:https://www.forexfactory.com/showthread.php?t=69409
MACD Trend Following Strategy
(Rules for A Buy Trade)
Step #1: Wait for the MACD lines to come up with a high high accompanied by less top swing point.
This is a unorthodox way of technical investigation. However we Dfxindo.com are all different. We overlook ‘t mind doing uncomfortable things if that’s what it takes to succeed in this business.
First, let’s visualize how an authentic swing point really looks on the MACD indicator:
The first rule of thumb to recognize a swing high on the MACD indicator is to look at the price chart if the respective currency pair is doing a swing high the same as the MACD indicator does. A higher high is the highest swing price point on a chart and must be higher than all previous swing high points. While a lower high happens when the swing point is lower than the previous swing high point.
This brings us to the next rule of the MACD Trend Following Strategy.
Step #2: Connect the MACD line swing points that you have identified in Step #1 with a trendline.
This step is quite simple, right?
See below, how your chart should look like after you correctly identified the swing points on the MACD indicator and connected them through a trendline.
At this point, we really ignored the MACD histogram because much of the information contained by the histogram is already showing up by the moving averages. Look at the price action now and compare it to our MACD trendline we drew early. We can clearly notice that the MACD contains the price action much better and reflects the trend much clear.
But, at this point, we’re still not done with the MACD indicator, which brings us to the critical part of our MACD Trend Following Strategy.
Step #3: Wait for the MACD line to break above the trendline. (Entry at the market price as soon as the MACD line breaks above).
When the MACD line (the blue line) crosses the signal line (the orange line) it’s an early signal that a bullish trend might start. However, if trading would be that easy we would all be millionaires, right? And that’s the reason why our MACD Trend Following Strategy is so unique.We’re not only waiting for the MACD moving averages to cross over but we also have our other criteria for the price action to break aka the trend line we drew early.
This is a clever way to filter out the false MACD signals, but you have to be equipped with the right mindset and have patience until all the piece of the puzzle come together. If you were to trade just based on the MACD crossover over time you’ll lose money because that’s not a reliable strategy.But if you use the MACD indicator along with other criteria such what this strategy tells you to do, you will find great trade entries on a consistent basis.
Step #4: Use Protective Stop Loss Order. (Place the SL below the most recent swing low).
Now, that you already know how to enter a trade at this point you have to learn how to manage risk and where to place the SL. After all, a trader is basically a risk manager.
You want to place your stop loss below the most recent low, like in the figure below. But make sure you add a buffer of 5-10 pips away from the low, to protect yourself from possible false breakouts.
Did you notice?
The MACD Trend Following Strategy triggered the buy signal right at the start of a new trend and what is most important the timing is more than perfection. We bought EUR/USD the same day the bullish divergence trend started.
Now, what this has to do with the SL?
Basically, a good entry price means a smaller stop loss and ultimately it means you’ll lose a lot less comparing it with the profit potential, so a positive risk to reward ratio.
Step #5: Take Profit when the MACD crossover happens in the opposite direction of our entry.
Knowing when to take profit is as important as knowing when to enter a trade. However, we want to make sure we don’t make use of the exact same trading procedure because of the entrance arrangement. Once the MACD line (the blue line) produces signal lineup cross overs (the orange line)you desire to close the positioning and also simply take full profits.
Before accepting profits, it’s ‘s vital that you await the candle – either the 4-h or the candle – based on the timeframe you trade accordingly that you ensure that the MACD cross over actually happens.
Note** The preceding was an example of a purchase trade with the MACD Trend Following Strategy. Make use of the specific same rules – however in reverse – for a sell trade. From the figure below you are able to see a genuine SELL trade case working with the MACD Trend Following Strategy.
Take a Peek:
We’ve implemented the Exact Same Step #1and Step#2to assist us draw on the trendline and followed closely Step #3to activate our trade
The MACD Trend Following Strategy is an incredibly simple fashion following strategy yet a very profitable strategy at precisely the exact same moment. Because they say, “The trend is your friend” with no matter whether you’re simply starting as a Forex trader or you also ‘re an established trader life is a lot easier when trading at direction of this point of least resistance as opposed to fighting the tendency that’s a failure ‘s match.
The success behind the MACD Trend Following Strategy hails in a particular principle: momentum simplifies cost. Our team Dfxindo.com doesn’t claim to be perfect, but we have a solid understanding of how the market works. For those of you who are not fans of higher time frames and swing trading, we recommend the”Day Trading Price Action- Simple Price Action Strategy”which can be more suitable for your trading style.
Please leave a comment below if you have any questions about MACD Trend Following Strategy!