To use MACD signal properly requires considering the signal line of the oscillator. Once we start to look for more nuances, we will able to time our entry on the correction end. This ability, coupled with proper trend and momentum identification will create a viable day trading solution. Strategy was tested for profitability on high quality historical data since 2003 and can be applied across all currency pairs and timeframes.
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The premise of the strategy is simple. We use ADX forex indicator to properly identify trend and momentum on our time frame. Then we move on to MACD oscillator when we consider all acquired information to try and find a correction end within the trend. If we succeed, risk reward ration of our entry is overwhelmingly in our favor.Expert advisor is provided freely by theforexkings.com together with full strategy rules.
Used tools and forex indicators
Average directional movement index (ADX 15). Apply additional line (value 10) in the indicator window. Main ADX line must trend above this line to confirm sufficient trend momentum (for both up and downtrend). Then we look for relative position of DI- and DI+ line to each other. Position of those two lines will help us identify trend direction.
Moving average convergence divergence (MACD 12,26,9). MACD histogram rising against the trend direction will mark the counter trend correction. Once the histogram parts its ways with red dotted signal line we will enter the trade on candle close.
Trailing stop. The EA provided by theforekingsincludes advanced trailing stop function (behind every candle close). Additional distance can be also applied.
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Forex strategy rules
SELL
ADX main line trending above 10 line applied in the indicators window. Momentum confirmed.
DI- trending above DI+. Downtrend confirmed.
MACD histogram rising above zero line. Once the histogram closes below signal line (red). We enter the trade short on candle close.
Stop loss: 60 pips
Take profit: 150 pips
Trailing stop:100 pips
BUY
ADX main line trending above 10 line applied in the indicators window. Momentum confirmed.
DI+ trending above DI-. Uptrend confirmed.
MACD histogram falling below zero line. Once the histogram closes above signal line (red). We enter the trade long on candle close.
Stop loss: 60 pips
Take profit: 150 pips
Trailing stop:100 pips
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Disclaimer: Expert advisor was tested for profitability on historical data. All screen shots provided are displaying real results of the test. However past data will never guarantee future success. Every expert advisor needs to be tested properly on demo account. LIVE use only on your own risk. Read full disclaimer. TheForexKings Team does not give any financial advice. TheForexKings does not take any responsibility for any user’s investments and investment decisions. All rights reserved. Strictly for personal use.
