MACD is one of the most commonly used technical trading indicators in forex.
This utterly simple strategy will help you to trade MACD with the short-term trend.
Great for scalping and day trading currency pairs.
Trading Tools/Settings
Indicators: MACD (moving average convergence/divergence) with default settings(12,26,9).
Time frame(s): 5 Min and above
Trading sessions: All
Currency pairs: All
Download
Download the Simple MACD Strategy.
GBP/USD 4 Hour Chart Example
Trading Rules
Long Entries:
- MACD histogram closes above it’s zero line from below.
Place protective stop-loss below the most recent support area. Take profit when the MACD crosses below the zero line from above(basic MACD exit strategy).
Other buy exit strategies: Exit long trade at 1:2 risk-to-reward. Exit at key resistance levels. Exit long trade at trend line violation.
Trend Line Violation (GBP/USD Long trade closed for 464 pips)
Short Entries:
- MACD histogram closes below it’s zero line from above.
Place protective stop-loss above the most recent resistance area. Take profit when the MACD crosses above the zero line from above(basic MACD exit strategy).
Other sell exit strategies: Exit short trade at 1:2 risk-to-reward. Exit at key support levels.
Advantages of basic strategies with MACD
Very easy to apply. Works well in trending markets.
Disadvantages
It doesn’t perform well in range-bound “flat” markets. Use in conjunction with other indicators or techincal analysis tools.