MACD Trend Following Strategy
One of the most striking ways to follow trends is by using an oscillator, and the MACD indicator is an attractive way of achieving this.
Although, it pretty sounds easy, this method can accurately predict price action.
The MACD Trend Following forex strategy uses MACD to generate powerful buy and sell signals in the direction of the most profitable trend, defined by the GMMA moving average indicator.
Learn how it works and how to use this strategy with our tutorial:.
MetaTrader4 Indicators: Xma.ex4 (Colors Modified; #0=Red, Colors Width Modified; #0=2), GMMA_Long.ex4 (Default Setting), 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
Buy Trade Example
Long Entry Rules
Initiate a buy entry if the following indicator or chart pattern gets put on display:
1. If the blue lines of the GMMA_Long.ex4 custom indicator cuts through the red line of the Xma MT4 indicator in a bottom up fashion as seen on Fig. 1.0, price is said to be taken higher i.e. a trigger to buy the designated forex pair.
2. If the green histograms of the MACD MT4 indicator gets aligned above the 0.00 level as shown on Fig. 1.0, the overall market sentiment is said to be bullish, as such a buy alert will suffice.
Stop Loss for Buy Entry: Place stop loss below the most recent swing low.
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 lines of the GMMA_Long.ex4 custom indicator during a bullish signal (see Fig. 1.0), it is indicative of a bearish reversal i.e. a trigger to exit or take profit at once.
2. If the MACD custom indicator displays a green histogram below the 0.00 level while a buy signal is running, more buyers are said to be exiting their trades, hence an exit or take profit will suffice.
Sell Entry Rules
Enter a sell order if the following holds sway:
1. If the blue lines of the GMMA_Long.ex4 custom indicator cuts through the red line of the Xma.ex4 indicator in a top downward manner as shown on Fig. 1.1, price is said to be driven lower i.e. a trigger to go short on the forex pair of interest.
2. If the green histograms of the MACD indicator gets aligned below the 0.00 level as depicted on Fig. 1.1, the overall market sentiment is said to be bearish, as such a sell alert will do.
Stop Loss for Sell Entry: Place stop loss above the most recent swing high.
Exit Strategy/Take Profit for Sell Entry
Exit or take profit if the following takes to the fore:
1. If price closes above the lines of the GMMA_Long.ex4 custom indicator while a sell alert is running, it is indicative of a bullish reversal i.e. a trigger to exit or take profit immediately.
2. If the MACD custom indicator displays a green histogram above the 0.00 level during a sell alert as illustrated on Fig. 1.1, more sellers are said to be exiting their trades, hence an exit or take profit is recommended.
Sell Trade Example
About The Trading Indicators
The Xma.ex4 indicator for MetaTrader4 is a Moving Average that contains a digital filter used in spotting trend along with flat states in the market.
GMMA_Long.ex4 indicator is a variant of the Guppy Multiple Moving Averages (GMMA) and is deployed in spotting changing trend, via a method that combines two groups of moving averages with varying time periods.
The Moving average convergence divergence (MACD) is a trend-following momentum indicator that reveals the connection between two moving averages of price.