MACD Magic Trend Forex Trading Strategy

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MACD Magic Trend Forex Trading Strategy 1

Profiting from the forex markets is all about understanding how a market move. It is about having a good sense of where the market is heading most of the time. Traders acquire this skill overtime as they study and observe the markets. Some traders spend thousands of hours observing price charts before they finally understood market movements. Some traders specialize on a specific currency pair in order to know how that pair moves day in and day out. Other traders learn price action and price patterns in order to anticipate market movements. However, all these take time putting new traders at a disadvantage. This is the reason why most traders fail. New traders start not knowing what to do. Only those who push through get to learn the markets and succeed. However, there are ways for new traders to still profit from the market. One of the ways to do this is through technical analysis and indicators. New traders could objectively anticipate trends and reversals by using technical indicators, allowing them to be profitable.

MACD Magic Trend is a trading strategy that is based on a couple of indicators which help traders anticipate trend directions and reversals. It allows traders to objectively decide which way to go, when to take the trade and when to exit.

Moving Average Convergence and Divergence

The Moving Average Convergence and Divergence (MACD) is one of the most widely used technical indicators. It is an oscillating indicator which indicates trend direction and momentum.

The MACD is basically a computation of the difference between two moving averages, typically an Exponential Moving Average (EMA). The longer-term moving average is subtracted from the shorter-term moving average. Then, the difference is plotted on a separate window as a histogram. Positive histograms indicate a bullish trend while negative histograms indicate a bearish trend. In a way, the MACD histograms is basically an entry signal for a crossover strategy.

The MACD also has another line called a signal line. The signal line is usually a derivative of a Simple Moving Average (SMA), which is plotted along side the MACD histograms. Entry signals could also be generated based on the crossing over of the histograms and the signal line.

Buy Sell Magic Indicator

The Buy Sell Magic indicator is one of my favorite trading indicators. This is because it is a very accurate indicator that helps determine highs and lows of a mid-term trend.

This indicator is basically a combination of a modified ZigZag indicator and a modified Parabolic Stop and Reverse (PSAR), both of which are excellent trend reversal indicators. If you would observe the Buy Sell Magic indicator closely, you would notice how accurate it is at pinpointing the actual peaks and troughs of a trend. Points which if identified, could allow traders to gain huge profits from the market.

The Buy Sell Magic indicator also conveniently prints arrows indicating the exact reversal points. These arrows serve as entry signals which traders could use in their trading systems.

Trading Strategy

This strategy is a trend reversal strategy based on the confluence of the Buy Sell Magic indicator and the MACD. Although the Buy Sell Magic indicator tends to be very accurate as a standalone indicator, it could sometimes return a loss if the market trend reverses too soon. Using the Buy Sell Magic indicator and the MACD indicator together increases the win rate since both indicators are complimentary. Signals generated by the two indicators which are somewhat aligned tend to have a higher probability of returning a profitable trade.

Indicators:

  • Buysellmagic02
    • Signal Period: 12
    • Arrow Period: 3
  • MACD
    • Faste EMA: 12
    • Slow EMA: 26
    • MACD SMA: 9

Timeframe: 1-hour, 4-hour and daily charts

Currency Pairs: major and minor pairs

Trading Session: Tokyo, London and New York

Buy Trade Setup

Entry

  • The Buy Sell Magic indicator should print an arrow pointing up and dots below price action indicating a bullish trend reversal
  • The MACD histogram should cross above zero indicating a bullish trend reversal
  • Enter a buy order at the confluence of the above conditions

Stop Loss

  • Set the stop loss at the support level below the entry candle

Exit

  • Close the trade as soon as the Buy Sell Magic indicator prints an arrow pointing down
  • Close the trade as soon as the MACD histogram crosses below zero

MACD Magic Trend Forex Trading Strategy 1

MACD Magic Trend Forex Trading Strategy 2

Sell Trade Setup

Entry

  • The Buy Sell Magic indicator should print an arrow pointing down and dots above price action indicating a bearish trend reversal
  • The MACD histogram should cross below zero indicating a bearish trend reversal
  • Enter a sell order at the confluence of the above conditions

Stop Loss

  • Set the stop loss at the resistance level above the entry candle

Exit

  • Close the trade as soon as the Buy Sell Magic indicator prints an arrow pointing up
  • Close the trade as soon as the MACD histogram crosses above zero

MACD Magic Trend Forex Trading Strategy 3

MACD Magic Trend Forex Trading Strategy 4

Conclusion

This trading strategy makes use of a high probability indicator, which is the Buy Sell Magic indicator. Using the entry signals generated by the Buy Sell Magic indicator allows us to have a relatively high win rate. Trading the signals generated by the Buy Sell Magic indicator in confluence with the MACD entry signals allows us to have an even better win rate. Trading this strategy could yield a decent return over the long run due to the consistent wins that this strategy could generate.

Using this strategy on a market that has a high propensity to trend allows us to maximize our returns. However, using this strategy on a low volatility or choppy market could sometimes result in a loss due to the early reversals of some trends. Use this strategy on the appropriate market condition and you could gain some profits steadily over the long run.

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