When: - The price is above the 4 hours 100-EMA - The MACD & Signal(5) lines are below zero - The MACD (blue) crosses above the Signal (red) line
We buy
When: - The price is below the 4 hours 100-EMA - The MACD & Signal(5) lines are above zero - The MACD (blue) crosses below the Signal (red) line
We sell
To keep in mind:
Specific to EURUSD (but it's almost the same thing with most major pairs that all have the same average true ranges): Stops are supposed to range from 15 to 40 points, with targets 30 to 80. The daily ATR ranging from 50 to 150 points. Anything below 30 pts target is starting to be too small and above 80 points it is too big we're not thinking intraday here.
A quick backtest on EURUSD
And that's already 21 trades for the EURUSD with a winrate of 52.4%, plus the title 5 setups that were a bit cherry picked I won't lie. I didn't even cherry pick them I got lucky on my first try (I thought I was continuing my backtest in July 2017 didn't realize it was on 2020) but I wouldn't expect an 80% winrate in general.
It is important to zoom out (I know no one does it). A look at the daily chart.
Just going to check quickly because it is getting boring. Should have taken the 5 minutes to make a script to filter this but I'm in too deep to go back now.
And I just noticed I have been backtesting GBPUSD with the 200 EMA. Well nevermind, it is the same thing. Result wouldn't change much.
And here I made the whole box. 12 Wins 19 Loss. Still a winrate of 38.7%.
I can go for worse ones
How about the recent EURUSD price action?
37.5% winrate
If you think it gets immediatly better, here are the next ones:
The findings:
- When the conditions are good it won 55% of the time - When the conditions are average it won 38% of the time - When the conditions are bad (range plenty of false trends) it won 10% of the time
With a RR of 2 the breakeven winrate is 33.33% But we have to include spreads. This strategy goes a bit further than "day trading" so stops and targets are quite wide. The typical stop/target is something like 25/50 (for EURUSD), the spread is 1 point. Other pairs of course are a bit more expensive.
If the risk reward on average is of 1.88 and the winrate is 38% then the profit factor is 38*1.88/62 = 1.15 which is not very high but if the strategy takes a whole lot of small trades it is ok. The few cases I looked at prove nothing, this might have a blind winrate of 50%, 20%, or 33.33% (most likely).
I don't know how to backtest with tools maybe I should learn so I can clic and let it execute for me... Stay tuned for a tutorial! :D
You would have to execute this strategy when you think the price will trend. But not a very strong trend or there will never be a signal. An average or weak one, or something that contains trends, like what I have shown and backtested 3 times. So this means you'd still have to make a directional bet. There is no escape. Sorry no magic trick to avoid it. A directional bet on the price or on the volatility itself, the trends...
Once you make your directional bet, what is the advantage of day trading with a macd strategy over just taking the trade and holding? The power of compounding.
Here someone made a backtest on the daily chart for the S&P500, the strategy took 500 trades with a profit factor of 1.2 and returned 95%! Without counting any spread/commissions. And just holding the S&P during the same period returned 151%. Amazing.
Then what is it that gets compounded with technical day trading? Easy. Losses & costs. Also causes to miss out when right about the direction. Lots of inconvenients, and no advantages. Sounds amazing. The power of COMPOUNDING™.
Ye I'm not sold. There might be a tiny edge but it's just so worthless. Picking pennies... Got to imagine the amount of desperation to make any profit anyone would have to try that. And they'd probably end up losing. Why did I waste my time?
Thank you so much. Is it possible to adapt it to daily chart? (I strictly do not daytrade forex)
MrRenev
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@Domsax48, What do you need this terrible strategy for? Don't you win most of your trades from your profile? It was a luck streak? I do not think this works neither on H1 or Daily. It might be used to get alerts on potentially a tightening-break in a trend, then up to you to filter it and do the analysis and make a directional call etc, I'd say it works better on daily for that purpose because at least you have time to do some research before entering.
It can be useful depending on how much time you have to allocate to following what's happening in the markets everyday. Following 20+ pairs and half a dozen commodities with a 9 to 5 job => Not possible.
You'll miss out on setups (even miss out full time quite often honestly) but ye so to sum up I think it can be useful not as a strategy but as an alert tool. I would play around with it see how many signals it gives, how many false signals we get, and how many potentially good setups we miss.
Je_Buurman
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Why didn't you script the whole thing in Pine ? shouldn't take much longer than it took to write this idea .. would give a more presentable result instead of the cherry picking
Je_Buurman
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btw: took the liberty to swap buy and sell above and under 100ema .. at least it looks half decent now
nah ..not even gonna comment on "moving averages"
😂
Je_Buurman
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stoploss and tp in place
.. and just as one fills in a small commision(fee) ... aaaaannnddddd it's gone, al gone ..poof :D