MACD Counter Trend Forex Strategy

Sometimes we feel the market has overextended, and that the market will attain a peak or a trough, and a possible reversal could be underway.

This is essentially a move against the predominant trend, and a potent trading strategy that can devise a means of knowing this is crucial.

The MACD Counter Trend Forex Strategy is designed to catch counter-trends and in so doing diversify and minimize your trading risk exposure.

It utilizes the support and resistance- Ac, Bollinger Bands and MACD custom indicators as a means of deciphering support/resistance levels, spotting breakouts and gauging trends respectively.

Chart Setup

MetaTrader4 Indicators: support and resistance- Ac.ex4 (Default Setting), Bollinger Bands (Inputs Variable Modified; Period=28), MACD (Default Setting)

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day

Recommended Trading Sessions: Any

Currency Pairs: Any pair

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Initiate a buy entry if the following indicator or chart pattern gets put on display:

  1. If the bands of the Bollinger Bands indicator squeezes along with price trading around the red dotted horizontal line of the support and resistance- Ac custom indicator as depicted on Fig. 1.0, a buy trigger is said to be in focus.
  2. If the MACD custom indicator forms green histograms that are aligned above the 0.00 level as seen on Fig. 1.0, it is a trigger to buy the selected currency pair.
  3. If price trades along the upper outer band of the Bollinger Bands, it is a trigger to buy the designated forex pair.

Stop Loss for Buy Entry: Place stop loss below the most recent swing low price.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following rules or conditions takes precedence:

  1. If price shows some resistance along the blue dotted horizontal line, it is indicative of a possible bearish reversal i.e. an exit or take profit is advised.
  2. If the MACD custom indicator displays a green histogram below the 0.00 level, it is a trigger to exit or take profit at once.
  3. If the Bollinger Bands contracts, it is a signal that spells decreasing volatility, as such an exit or take profit will suffice.

Sell Entry Rules

Enter a sell order if the following holds sway:

  1. If the bands of the Bollinger Bands indicator squeezes along with price trading around the blue dotted horizontal line of the support and resistance- Ac custom indicator as (see Fig. 1.1), a sell alert is said to be looming.
  2. If the MACD custom indicator forms green histograms that are aligned below the 0.00 level as shown on Fig. 1.1, it is a trigger to sell the designated fx pair.
  3. If price trades along the lower outer band of the Bollinger Bands, it is a trigger to go short on the currency pair of interest.

Stop Loss for Sell Entry: Place stop loss above the most recent swing high price.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following takes to the fore:

  1. If price shows some resistance along the red dotted horizontal line, it is indicative of a possible bullish reversal i.e. an exit or take profit will do.
  2. If the MACD custom indicator readjust to form a green histogram above the 0.00 level, it is a trigger to exit or take profit at once.
  3. If the Bollinger Bands contracts during a bearish trend, it is a signal that spells decreasing volatility i.e. an exit or take profit will suffice.

Sell Trade Example

Fig. 1.1

Free Download

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About The Trading Indicators

The Moving average convergence divergence (MACD) is a trend-following momentum indicator that reveals the connection between two moving averages of price.

The Bollinger Bands indicator consists of three bands with the outer bands being plotted as standard deviations away from the middle simple moving average band.

The indicator offers good clues on the state of volatility in the market.

The support and resistance- Ac.ex4 custom indicator is a technical tool that rules out major zones of support and resistance on the activity chart.

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