MACD Stochastic Forex Strategy

There are trading strategies that are quite versatile, making them every trader’s delight. In light of this, profitability plays a key role in allowing investor’s adopt a specific system.

The MACD Stochastic forex strategy is a profitable versatile strategy that can be applied on any currency pair and any timeframe. It works for scalping, day trading and swing trading.

Chart Setup

MetaTrader4 Indicators: Ultimate_MA.ex4 (Inputs Variable Modified; MA_Method=Exponential, fastperiod=50), Turn_Area_Chart.ex4 (Default Setting), MACD (Default Setting), Stochastic Oscillator (Parameters Modified; %k period=36, %D period=24, Slowing=24, MA method=Exponential)

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 (EUR/USD, GBP/USD, AUD/USD, USD/CHF, USD/JPY,..)

Download

Download the MACD Stochastic Forex Strategy

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 blue line of the Ultimate_MA custom indicator intersects the dark violet line of the Turn_Area_Chart custom indicator in a bottom up manner (see Fig. 1.0), price is said to be driven to the upside i.e. a trigger to buy the designated forex pair.

2, If the green histograms of the MACD custom indicator break above the 0.00 level as depicted on Fig. 1.0, price is said to be taken higher i.e. a buy alert is said to be looming.

  1. If the light sea green line of the Stochastic Oscillator break above the 50.00 level, it is indicative of a bullish trend, as such a buy signal will suffice.

Stop Loss for Buy Entry: Place stop loss below short-term support.

Exit Strategy/Take Profit for Buy Entry

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

  1. If price closes below the blue line of the Ultimate_MA custom indicator as shown on Fig. 1.0, price is said to be making a possible U-turn, hence an exit or take profit will suffice.
  2. If the green histograms of the MACD custom indicator readjust to form below the 0.00 level, a bearish reversal is said to be underway i.e. an exit or take profit is advised.
  3. If the light sea green line of the Stochastic Oscillator break below the 50.00 level during a buy signal, it is indicative of a weaning bulls power, hence an exit or take profit will suffice.

Sell Entry Rules

Enter a sell order if the following holds sway:

  1. If the blue line of the Ultimate_MA custom indicator intersects the dark violet line of the Turn_Area_Chart custom indicator in a top downward fashion as exemplified on Fig. 1.1, price is said to be pushed lower i.e. a trigger to sell the selected fx pair.

2, If the green histograms of the MACD custom indicator dip below the 0.00 level as seen on Fig. 1.1, price is said to be taken lower i.e. a sell alert is said to be underway.

  1. If the light sea green line of the Stochastic Oscillator break below the 50.00 level, it is indicative of an increasing bear’s power, as such a sell signal will do.

Stop Loss for Sell Entry: Place stop loss above short-term resistance.

Exit Strategy/Take Profit for Sell Entry

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

  1. If price closes above the blue line of the Ultimate_MA custom indicator as indicated on Fig. 1.1, bears power is said to be weaning, hence an exit or take profit is recommended.
  2. If the green histograms of the MACD custom indicator realigns to form above the 0.00 level, a bullish reversal is said to be in progress i.e. a trigger to exit or take profit at once.
  3. If the light sea green line of the Stochastic Oscillator break above the 50.00 level during a sell signal, it is indicative of a halting bears power, hence an exit or take profit will do.

Sell Trade Example

Fig. 1.1

Free Download

Download the MACD Stochastic Forex Strategy

About The Trading Indicators

The Ultimate_MA.ex4 is a modified moving average that computes the weighted average of 3 moving averages (Simple, Exponential, Smoothed or Linear Weighted).

It follows trends better than the single moving average and offers a good alternative to EMA or SMA for traders who don’t like untidiness.

The Turn_Area_Chart.ex4 is a trend following custom indicator that incorporates the exponential moving average method and relative strength index in defining price action.

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

The Stochastic oscillator is a momentum oscillator that is attributed to George Lane.

The indicator is made up of two lines, the %K fast line and the %D slow line, while it oscillates between 1 and 100.

Essentially, the Stochastic gauges the relationship between an assets closing price and its price range over a specified time period.

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