Years ago I used MACD in a fairly mechanical system using a multi-time-frame framework. It was interesting but as often occurs with systems they tend to work for a while then falter and thus one loses interest as I did. And yet I find myself entertaining the MACD again after doing some studying which I hadn't done in the past.
Being one that tends to shun indicators I find myself intrigued by my own renewed interest in MACD.
Anyhow, after some review I've come up with some concepts and strategies that I'll be testing live. I do not vouch for this method nor do I make any claims of being profitable using anything that follows so anyone following do so at your own risk.
Main characteristics of this new method:
1. Starting off with the 60 minute time frame but may use any time frame.
2. Identify trending behavior.
3. Seek trades during corrective leg of trend
4. Use MACD with default settings
4. MACD concepts that will be helpful when considering entries: 1)bullish and bearish divergence, 2)MACD crossover 3)Zero line or center line crossover
1. Identify trend on single time frame (no MTF analysis). For now I'll be using the 60 minute.
2. Trend is defined by the following minimum elements: An impulse followed by a correction followed by an impulse. Therefore IMPULSE LEG-->CORRECTION LEG-->IMPULSE LEG. This implies that a long term trending pair is not required. If a pair has been up trending and turns then if the new potential down trend satisfies the minimum trend requirement then it is valid. Same for a down trend that reverses. Of course trends in progress already satisfy the minimum and can be traded as such.
3. Trade entries sought on correction leg thus with-trend.
4. MACD signals: MACD line crossover during corrective wave with following stipulation:
During downtrend crossover should occur during correction and crossover must be above zero line or minimally touch the zero line.
During uptrend crossover should occur during correction and crossover must be blow zero line or minimally touch the zero line.
5. A MACD signal does not mandate a trade entry. Entry based on price action may be used as long as crossover continues.
6. Divergence: Bearish and Bullish divergences may be used for analysis but at this point no specific requirement will be required of their occurrences.
Definitions:
Bullish Divergence: Price makes a new low but MACD makes a higher low.
Bearish Divergence: Price makes a higher high while MACD makes a lower high.
MACD Crossovers: When the MACD line crosses over the signal line or the zero line (centerline crossover)
Bullish divergence
Bearish divergence
Sell with bearish MACD crossover above zero line in downtrending market
Uptrending market
Buy with bullish divergence and bullish MACD crossover below zero line in uptrending market
Others are welcome to contribute.
Being one that tends to shun indicators I find myself intrigued by my own renewed interest in MACD.
Anyhow, after some review I've come up with some concepts and strategies that I'll be testing live. I do not vouch for this method nor do I make any claims of being profitable using anything that follows so anyone following do so at your own risk.
Main characteristics of this new method:
1. Starting off with the 60 minute time frame but may use any time frame.
2. Identify trending behavior.
3. Seek trades during corrective leg of trend
4. Use MACD with default settings
4. MACD concepts that will be helpful when considering entries: 1)bullish and bearish divergence, 2)MACD crossover 3)Zero line or center line crossover
STRATEGY
1. Identify trend on single time frame (no MTF analysis). For now I'll be using the 60 minute.
2. Trend is defined by the following minimum elements: An impulse followed by a correction followed by an impulse. Therefore IMPULSE LEG-->CORRECTION LEG-->IMPULSE LEG. This implies that a long term trending pair is not required. If a pair has been up trending and turns then if the new potential down trend satisfies the minimum trend requirement then it is valid. Same for a down trend that reverses. Of course trends in progress already satisfy the minimum and can be traded as such.
3. Trade entries sought on correction leg thus with-trend.
4. MACD signals: MACD line crossover during corrective wave with following stipulation:
During downtrend crossover should occur during correction and crossover must be above zero line or minimally touch the zero line.
During uptrend crossover should occur during correction and crossover must be blow zero line or minimally touch the zero line.
5. A MACD signal does not mandate a trade entry. Entry based on price action may be used as long as crossover continues.
6. Divergence: Bearish and Bullish divergences may be used for analysis but at this point no specific requirement will be required of their occurrences.
Definitions:
Bullish Divergence: Price makes a new low but MACD makes a higher low.
Bearish Divergence: Price makes a higher high while MACD makes a lower high.
MACD Crossovers: When the MACD line crosses over the signal line or the zero line (centerline crossover)
Bullish divergence
Bearish divergence
Sell with bearish MACD crossover above zero line in downtrending market
Uptrending market
Buy with bullish divergence and bullish MACD crossover below zero line in uptrending market
Others are welcome to contribute.