Tag: macd trading strategy

Tag: macd trading strategy

Does this Trading Strategy even make money in the Crypto Market? In this video, I’m going to take 100 trades with one of the best trading strategies to find its win rate and to see how much money it can actually make on the world’s largest cryptocurrency, Bitcoin.

We have tested a lot of trading strategies 100 times till now, but the best trading strategy we have tested on the Trading Rush Channel, was the MACD strategy. This strategy not only got the highest win rate, but the profit graph was also consistently going in the upward direction. Furthermore, it even got the highest score in the reliability category, and everyone who watches Trading Rush most likely knows by now that the reliability score of a trading strategy is more important than the win rate.

But here’s the thing. If the MACD Trading Strategy got the highest win rate out of all the strategies we have tested so far if we test it again on a different but good market structure, it should get a high win rate again, right? Remember, on the Trading Rush Channel, we don’t simply believe a strategy works. Instead, we analyze the real data the strategy produced in the real market and think logically. If data says it makes money, we use it and make money. If the data shows a bad win rate, we simply don’t use it!

In this video, we are going to test two things by taking 100 trades, first, if the Highest Win Rate Strategy we saw on the Trading Rush Channel can also give a similar high win rate on a different market. And the second thing we are going to test is, if the strategy works in the Crypto Market especially on Bitcoin, and how much money you would have made in this year, especially in approximately the last six months with this high win rate trading strategy.

On the world’s largest cryptocurrency, Bitcoin, the MACD strategy conditions are pretty much the same, except there is one thing different with Bitcoin that can make you lose money quickly. We will learn more about that at the end of the video.

Before we take 100 Trades, here’s how the MACD strategy works on Bitcoin:

Step 1. Buy when the MACD line crosses above the Signal line, below the zero line, only if the entry candle is above the 200 period moving average. Similarly, Sell when the MACD line crosses below the Signal line, above the zero line, only if the entry candle is below the 200 period moving average. If this sounds confusing, I have already made two to three detailed videos on the MACD indicator, the mistakes people make with it, and the best part about it.

Step 2. As you probably noticed, we are using the 200 period moving average to find the trend direction, in other words, it is still a trend trading strategy. In the long setup, set the stop loss below the pullback of the trend. And in the short setup, set the stop loss above the pullback of the trend.

Step 3. Set the profit target 1.5 times the size of the stop loss. This number is not randomly selected. It is the best reward to risk ratio we have found after taking 300 trades.

I tested this MACD strategy 100 Times on the largest cryptocurrency, and here’s what happened, and here are the points you should note.

Number 1. We are testing strategy on the latest market structure, because we are going to trade on the current market structure, and not on some few years old data where the market was slow and ranging and not worth day trading.

If you look at the chart, you can see that when the price was above the moving average, the MACD showed the end of the pullback using the crossover, and many of these trades at the beginning were won. When Bitcoin was in a downtrend, the MACD strategy simply gave good short entry signals and many of those trades were won.

As you can tell, the MACD strategy is not only giving good entry signals like it did when we tested it 100 times on the Forex Market, but the price movement of Bitcoin itself looks very similar to a good Forex price chart. Since the MACD strategy we saw on the Trading Rush channel does one job better than other indicators, show the end of the pullback with high accuracy, it doesn’t matter if it’s Bitcoin or Forex Market, if the price is trending, the MACD strategy will show the end of the pullback with great accuracy.

When we tested the MACD last time, the profit graph looked like this. The price was more consistently moving in the upward direction. And as you can see, on Bitcoin, the profit line in the Trading Rush App is also consistently going in the upward direction.

Also, this profit graph is way better than some of the other ones we have seen so far. For comparison, here is the profit graph of another strategy we tested 100 times, and here’s the profit graph of the MACD strategy. As you can see, MACD’s profit graph looks a lot better in the long run.

In fact, while taking 100 trades, the MACD trading strategy on Bitcoin only lost 3 trades in a row. This means the MACD strategy was just as reliable on Bitcoin as it was on the Forex Market.

But that’s not all. There is another reason the MACD strategy is performing so well on Bitcoin.

You see, when Bitcoin was all over the news for the first time for making this big upward move, the volatility on smaller timeframes was high. In other words, the price was making big moves and not staying at the same place for a longer period of time. After Bitcoin made a move in the downward direction, the volatility was relatively lower and the price was staying in the sideways direction for a longer period of time.

Now the MACD strategy is performing so well in the latest market structure, is because most of the current market structure is making good moves like before. Since the MACD strategy is a trend following strategy, and since the current market structure is making good moves, the MACD strategy that we saw in the very first video on the Trading Rush Channel, is giving a high win rate on Bitcoin just like it did in the Forex Market, and the profit graph is consistently moving in the upward direction.

But there is one important thing you should keep in mind. You see, Bitcoin is still Bitcoin. One time it is going to the moon, and the other time it is crash landing. The price movement of Bitcoin is different than what you see on a good stock, or even in the Forex Market.

When the price movement is good like it is right now, the MACD win rate will be good because the MACD strategy needs a trend. But if the Bitcoin movement slows down like it did last time, and the price starts to stay in a range for longer periods of time, the win rate will be obviously lower because the MACD strategy is not a range market strategy. If the price itself is not moving, you can’t magically make money. But right now the price movement is good, and the MACD trading strategy on Bitcoin is giving a very high win rate even with a high reward risk ratio, and we have the data that proves it!

After 100 trades on the world’s largest cryptocurrency, Bitcoin, the MACD strategy got an approximate win rate of 62 percent with a 1.5 to 1 reward risk ratio. Remember that the reward to risk ratio was 1.5 to 1, so a 62 percent win rate is actually very high. If you want a higher win rate, you can reduce the reward risk ratio to 1, but in the data we saw by taking 300 trades, the 1.5 to 1 reward risk ratio was the sweet spot. The MACD strategy performed excellently on Bitcoin, and only lost 3 trades in a row and won 9 trades in a row. And the profit graph consistently went in the upward direction just like we expected!

You can improve the win rate of the strategy even more, by combining it with the high probability strategies I talked about in the Trading Rush Price Action Course. The link is in the description! Also, Support Trading Rush on Patreon, and get to see more In-Depth Trade Analysis with the current best strategies I use. That’s all!

HALF MACD Trading Strategy 100 TIMES so you don’t have to…

Post author By Trading Rush
Post date May 10, 2021
2 Comments on HALF MACD Trading Strategy 100 TIMES so you don’t have to…

trading strategy forex day trading strategies stocks 100 times trix trading rush best top trading strategies make money

Tag: macd trading strategy

This is the TRIX indicator, but what’s the win rate of the TRIX Indicator? I have explained the TRIX strategy in the TRIX strategy video, and in this video, I took 100 trades with it to see if it makes money or not. Here’s what happened. Since the TRIX indicator is basically a line, that crosses above and below another line, you might expect it to perform badly, give too many false signals in a row. But like the title of the TRIX video said, it gives entry signals without many false signals. How can the strategy we created using this one simple line give fewer false signals in a row? I think you can answer that question yourself if we add the MACD indicator on the chart. The MACD trading strategy got a high win rate on the Trading Rush Channel because it was excellent at identifying the end of a pullback in the trends. If you look carefully, you will notice that the TRIX indicator looks very similar to the MACD indicator. In fact, if we hide the MACD line from the MACD indicator, you can clearly see that the TRIX indicator line moves very similar to the Signal line of the MACD indicator. Since MACD got a high win rate, will the TRIX indicator will get a high win rate as well? Well, not exactly.

When I took 100 trades with it, it lost few trades at the beginning. The strategy was tested on EURO JPY and on 30 minutes timeframe. Most strategies we have tested so far, win a couple of trades at the beginning including the MACD strategy, but this one lost trades even though the market structure was the same. You see, in the MACD strategy, you buy at the crossover of the MACD and the signal line. But in the TRIX indicator, there is no signal line. So for the TRIX indicator to give an entry signal, the TRIX value has to cross above or below the zero line. Because of this, even though the TRIX indicator properly identified the end of a pullback, the indicator gave late entry signals compared to the signals of the MACD indicator.

But even though the signals were late, they were still similar to the MACD signals. MACD’s profit graph looked something like this. A good relatively consistent uptrend. And after losing few trades at the start, the profit graph of the TRIX Trading Strategy also started to move more consistently in the upward direction similar to the profit graph of the MACD Trading Strategy.

And after 100 Trades, it got an approximate win rate of 47 percent with a 1.5 to 1 Reward Risk Ratio. This is the profit graph of the CMO indicator that we tested recently. The CMO indicator got a good win rate because it gave more and faster signals in a trend, and didn’t give a lot of the profit back in the range or slow market. The best part about the CMO strategy was its win rate, and with the TRIX Trading Strategy, the best part was the consistency of the profits.

5.5+7.5+6+5+7=31

Even though the CMO strategy was better when it comes to the win rate, if we visit the Trading Rush Website, we can see the TRIX indicator took the lead in the Quality of Trades, Reliability, and, Consistent Profits category, and gets a higher TR Score of 31 out of 50, and ranks 13th from the top, above the MACD with Ichimoku Cloud Strategy, and below the Chaikin Oscillator Trading Strategy.

The TRIX indicator is like the MACD indicator. Its strategy gives more consistent profits like the MACD strategy but is slow because it lacks the signal line. That’s all!

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MACD CLONE 100 TIMES so you know sure thing

Post author By Trading Rush
Post date December 8, 2020
4 Comments on MACD CLONE 100 TIMES so you know sure thing

know sure thing trading strategies

Tag: macd trading strategy

Is this indicator better than the MACD indicator? and will it make you more money in trading? In this video, I took 100 trades with a MACD look a like, and the results were pretty interesting. As you know, MACD was the best performing indicator we have seen on the Trading Rush Channel. If an indicator can perform better than the MACD indicator, it will be a big deal, because MACD strategy with a 1.5 to 1 reward risk ratio gave a win rate of more than 60 percent after testing 100 times, and if we stumble upon a new strategy or indicator that gives more win rate than that, we will be talking big profits. There is an indicator that looks very similar to the MACD indicator. Is this the next big thing? Will this make more money than the MACD strategy? Let’s find out.

Know Sure Thing is a momentum based indicator just like the MACD indicator. On the TradingView Platform, it looks like this, and as you can tell, it looks very similar to the MACD indicator. There is a KST line and a signal line, and the Know Sure Thing value crosses above and below a zero line. Since this is a momentum indicator, traders use it to spot all kinds of momentum indicator things like divergences and crossovers. What we want is to find out if it actually works in the long run. There are multiple trading strategies based around the KST indicator, and Here’s how one of the Know Sure Thing Strategy goes.

When the KST line crosses above or below the signal line, it can indicate a change in momentum. So when the KST or Know Sure Thing line crosses above the signal line, it’s a buy signal. Furthermore, the KST value has to be below the 0 line. Similarly, when the KST line crosses below the signal line, it is a sell signal. Furthermore, the sell crossover has to be above the zero line.

Here’s an example, the KST line crosses above the signal line and the crossover is below the zero line. If you would have bought it here, KST would have made you money. And in this example, the KST line crosses below the signal line, and the crossover is above the zero line. If you would have sold after the crossover, KST would have made you a profit. But wait, don’t be fooled by looking at these hand picked setups. This doesn’t mean that this strategy is profitable at all. If you have watched other videos on the Trading Rush Channel, like the video if you have, you already know there is one thing wrong with this setup. In this Know Sure Thing Setup, Know Sure Thing Doesn’t Know the Long term trend direction. And subscribers of this channel know that you can increase your chances of making money as a trader by taking trades in the long term trend direction.

If you take all entry signals given by the Know Sure Thing Indicator, you will probably lose money because know sure thing can give short entry signals in a strong up trending market, and vice versa. So to fix that, we will use the 200 period exponential moving average. This will show you the direction of the long term trend direction, and filter false signals.

So the complete modified Know Sure Thing Trading Strategy goes something like this. If the crossover is below the zero line, and above the 200 period moving average, The Long entry signal is when the KST line crosses above the signal line. Crossover below the zero line, and above the 200 period moving average. Stop loss below the pullback.

Similarly, If the crossover is above the zero line, and below the 200 period moving average, the short entry signal is when the KST line crosses below the signal line. Above the zero line, but below the 200 period moving average. Stoploss goes above the pullback of the trend.

In this example, price is in a strong uptrend, we can tell it is in an uptrend because it is staying above the moving average. The KST indicator gave a bullish crossover below the zero line. So the entry is after the crossover, and stoploss is below the pullback.

Here, price is below the 200 period moving average, so we will only look for short entry signals. The KST indicator gave a short entry signal, and the signal was above the zero line. So the entry is after the crossover, and stoploss is above the pullback.

Now that you understand how the strategy works, let’s test the Know Sure Thing Trading Strategy 100 times, to make sure the know sure thing actually knows what it is talking about. After testing 100 times, here’s what I found out.

Number 1. Know Sure Thing is just like other momentum indicators, it shows the strength and weakness. You can use this information to find if the pullback of a trend is getting weaker or not. Obviously, we are using the KST indicator as a trend following indicator, and in a trend, we are using it to find the end of a pullback. And while testing, it was indicating the end of the pullbacks with a good accuracy. Now, I say good, but it is not as accurate as the MACD indicator. Earlier in this video, you saw me compare it with the MACD indicator, and if you put them side by side, they visually look very similar. In fact, if you remove the histogram from the MACD indicator, most people probably won’t be able to tell the difference between the two. But if you look closely, you will notice something. During backtesting, the KST indicator was not as good as the MACD indicator, and if you look closely, you will notice why. As you can see, the entry signals given by the KST indicator are a little bit late than the entry signals given by the MACD indicator.

Look at this example. Price is in a downtrend, and both of them gave a short entry signal. But as you can tell, the MACD signal was way better than the KST signal. With the MACD signal, with entry at the MACD candle and stop loss above the pullback, you could have made 3 times more profit than your risk. But on the other hand, after the KST signal, price didn’t even go down enough to reach the 1 to 1 reward risk ratio.

In other words, the KST indicator is indicating the end of a pullback quite accurately, but it is a bit late, especially when compared with the MACD signals. Because of this, the probability of the price reaching you higher reward risk ratio profit target becomes lower.

In the end, after 100 trades with the Know Sure Thing Indicator, I found out that the win rate of the KST indicator is approximately 52 percent with a 1.5 to 1 reward risk ratio. In the Official Trading Rush App, you can see that the Know Sure Thing Trading strategy made a profit! It made a profit of 3000. The highest profit was 3300. The profit graph also looks consistent with 6 losses in a row, but 7 winners in a row. This win rate is not as bad as some other trading strategies we have seen, but not as good as some other strategies we have tested on the Trading Rush Channel. But one thing is sure, the Know Sure Thing really knows what it is talking about. If you haven’t seen trading strategies with more win rate than this, check out other trading strategy videos on the Official Trading Rush Channel.

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5 MACD Strategy MISTAKES you should avoid in Trading Forex Stocks… or…

Post author By Trading Rush
Post date October 21, 2020

macd strategy mistakes

Tag: macd trading strategy

Since the first MACD video on the Trading Rush channel, many have emailed me about how they are getting win rates as high as 68 percent. Many are getting multiple green days in a row, but then there are few people who are only getting win rates around 50 to 55 percent. First of all, you are getting more than 50 percent win rate with a reward to risk ratio of 1.5 to 1, there are people who spend a lot of money on courses to get win rates like that. If you do the math, a 55 percent win rate with a 1.5 to 1 reward ratio, is a really good win rate to make money in trading. Of course it is not good as many of you guys are getting, and not even close to the win rate we saw in the MACD strategy video. So I compared the MACD setups with 50 percent win rates, with setups of the people getting around 60 to 65 percent win rates, and found 5 common mistakes in almost all the 50 percent setups, that are keeping them away from making more money in trading.

The first mistake the 50 percent win rate setups made, that people with more than 60 percent win rates avoided, was not following all the MACD strategy rules. In the MACD video and the videos after that, I clearly said that while backtesting, I didn’t take trades that had confusing or bad entries, and you should avoid them as well. This rule was ignored by couple of people. I have taken many trades with the MACD strategy in the liive markets over the years, when I made the MACD strategy video, which was also the first video on this channel, I explained the strategy and added few rules that I personally found useful. Over the years, I noticed some downsides and advantages of the MACD strategy. So when I made that video, I added my personal rules to make the MACD strategy even more effective. One of those rules that was implied in that video was not taking trades when price has already made a big move in your favor.

One of the drawbacks of the MACD strategy, is that price sometimes makes a big move exactly on the MACD candle, or one or two candles before it.

For example, this is one of the trades I shared with the wonderful Patrons who support the Trading Rush on Patreon. In this trading setup, I did other analysis using multiple timeframes and was waiting for the MACD to give a crossover. But exactly on the MACD signal candle, the price made a big move in my favor. This makes the signal invalid, and I didn’t take it because the price already made the move I was anticipating. Furthermore, even if I had taken the entry after this big candle, the stoploss would have been so big, that price would have had to travel a lot of distance to get a decent reward to risk ratio. In other words, the probability of these setups are really low, and that’s exactly why I added the “don’t take when entry looks confusing rule”, and ignored the trades that had way too big stoplosses and other similar issues, and added 0 in profit when the entry was confusing while backtesting.

The second mistake I see a lot of people make, is using a bot or script to test the strategy. In the MACD strategy, there is a reason why I recommend setting the stoploss below or above the pullback of the trend. The pullback in the MACD strategy is really important, I will explain why in detail in a future video, maybe Subscribe to see that, and ring that notification bell so you don’t miss it. In the MACD strategy we set the stoploss just above or below the pullback. Now if you can exactly identify the end of a pullback while backtesting with a bot, there is no problem. But many people find it difficult to find a pullback. And in many of the less performing MACD setups that you guys have sent me, the stoploss is set at the wrong place. People use Fractals and other similar indicators to find the pullback while auto backtesting. A pullbacks according to the fractal indicator won’t be always right, because price action during a reversal is not always that smooth. Price can get choppy and go sideways before goin back in the direction of the trend. When this happens, indicators that you are using to find the pullback, will probably give a lot of false signals, or in other words, will turn a profitable strategy into a losing one.

One of the reasons I manually backtest instead of using scripts, is because every trade is different and setting a proper stoploss and profit target is much easier when I can see the obvious end of a pullback.

The third mistake is not trading the trend. If the price is moving sideways for a while, most indicators, except the Indicators that are designed for range market trading, will give false signals. The MACD strategy is a trend following strategy, so it works really good when the market is trending. if you get low win rates with the MACD strategy, make sure the moving average is not looking flat while entering the trades. When the moving average is flat, you should probably avoid trading on that stock or forex pair with the MACD strategy.

The fourth mistake, and it’s not really a backtesting mistake, that gave win rates around 55 percent to some, when many people got win rates as high as 68 percent, was not analyzing the market structure. If you have watched the 5 steps strategy video, you know how important multi timeframe analysis can be. In my liive trading videos, and in the trades I share on Patreon, I almost always use the multi timeframe analysis to get the big picture. Multiple timeframe analysis can help you identify price points where MACD can give a good entry signal. Multi timeframe analysis is one of the most important things you can do before taking a trade. MACD strategy gives around 62 percent win rate on its own, but multi timeframe analysis is one of those things that helped many achieve win rates high as 68 percent. If you are struggling with a strategy, try multi timeframe analysis. You can watch the 5 steps strategy video on the Trading Rush channel to learn more about that.

The 5th mistake that is seen among beginner traders, is taking 10 trades to find the win rate of a trading strategy. To see if a strategy is a profitable trading strategy or not, you will need to find its approximate win rate. 10 trades is not enough, 100 trades or more are good enough to see if something works in trading or not. Remember, the accurate win rate and approximate win rate are two different things. There is probably no such thing as an accurate win rate of a trading strategy, because the market is always changing. Stock trading many years ago was a little bit different than what it is now, that’s because of the change in liquidity. To see if a strategy works or not, you only need to find its approximate win rate, which you can do by testing it 100 times or more.

For example, if a strategy with a 1.5 to 1 reward risk ratio gives around 60 percent win rate after testing 100 or more times, there is a very high chance that the strategy is a profitable strategy as we have seen after taking 10000 virtual trades in one of the other videos. And remember, win rate of a strategy goes up if the reward to risk ratio goes down, and vice versa. A strategy can have a very high win rate and still lose money, if the reward to risk ratio is bad. Similarly, one can have a strategy with a very low win rate such as 20 percent, and still make money in the long run if their reward to risk ratio is very high. In other words, if they are taking more profit than the risk per trade. So next time when someone says that their strategy has this and that win rate, ask them with what reward to risk ratio. Because they might be taking lower profits than the risk, just to get a high win rate, and to fool you into buying their paid trading courses. Don’t fall for that.

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I took 100 trades with MACD + STOCHASTIC Trading Strategy and the results were…

Post author By Trading Rush
Post date October 18, 2020

macd stochastic trading strategy

Tag: macd trading strategy

If we combine the MACD with the Stochastic indicator, will you make more money in trading? Does the MACD and Stochastic indicator even work together? Well, MACD is one of the best indicators we have tested on the Trading Rush channel. We found out that the MACD indicator has a really high win rate when compared with other indicators we have tested so far… but can we increase that win rate even more by combining the MACD with the Stochastic indicator?

Now I haven’t tested the Stochastic indicator yet, but I have tested the Stochastic RSI trading strategy 100 times, and it didn’t had a very good win rate. In fact, the win rate it had was even worse than the regular RSI trading strategy. But that’s Stochastic RSI, not the Stochastic indicator. I’m going to test the Stochastic indicator 100 times on its own in the future videos. So Subscribe to the Trading Rush channel and ring that notification bell, to see Stochastic and other trading indicators tested 100 times to find their win rates, because you don’t want to trade with a strategy that doesn’t even work.

In this video, I’m going to test the MACD and Stochastic trading strategy 100 times to see if it works. Now you already know about the MACD strategy so I won’t go into detail about it. If you don’t know about the best MACD trading strategy, check out the first video on this channel.

In the MACD strategy video, I said buy when the MACD gives a crossover below the zero line, and sell when the MACD gives a crossover above the zero line. But in the MACD and Stochastic trading strategy that you guys have brought to my attention, long trades are not necessarily taken below the zero line, and short signals are not always taken above the zero line.

In my MACD strategy video, I said to buy below and sell above the zero line because of how the MACD is calculated and works. I will explain why zero line of the MACD indicator is so important in a future video.

In the MACD and Stochastic strategy, the rule that made the MACD strategy so successful is broken. Here’s how the MACD and Stochastic strategy goes.

When the K line of the Stochastic indicator, crosses below 20, buy at the bullish MACD crossover. Bullish MACD crossover is when the MACD line crosses above the signal line. The crossover doesn’t have to be below the zero line. For example, here, first the K line of the Stochastic indicator went below 20. When this happens, it means the price is oversold and we should look to buy. But we won’t buy until we see a bullish MACD crossover after the Stochastic oversold signal. Remember, the buy signal is only valid, if the MACD crossover comes after the Stochastic oversold signal. Set your stoploss just below the swing low.

Similarly, when the K line of the Stochastic indicator, crosses above 80, sell at the bearish MACD crossover. Bearish MACD crossover is when the MACD line crosses below the signal line. For example, here the K line of the Stochastic indicator went above 80. It means that the price is over bought and we should look to sell. But we will only sell when a bearish MACD crossover signal is generated after the Stochastic over bought signal. Remember that MACD sell signal has to come after the Stochastic over bought signal. Set your stoploss just above the swing high.

Now this is not a trend following strategy. As you already know, on the Trading Rush channel, we trade in the direction of the long term trend direction. We can use the 200 period exponential moving average to find the trend direction. A long entry signal given by the MACD and Stochastic strategy is only valid, when the entry candle is completely above the moving average. Similarly, a short entry signal is only valid, when the entry candle is completely below the 200 period moving average.

So, I tested the MACD and Stochastic trading strategy 100 times, and here’s what happened.

Number 1. As you probably guessed, the false signals that we filtered in the MACD trading strategy video, were taken in this strategy. Since MACD is an excellent indicator when it comes to indicating the end of a pullback in a trend, not all crossover signals taken without the zero line rule were bad. I tested the strategy on the 30 mins timeframe and on the Euro JPY pair, and I used the official Trading Rush App while backtesting. You can download the Trading Rush app from the play store or using the link in the description. Use it while testing your trading strategy, it will calculate win rate and other data in just one click.

Number 2. Since we used the Stochastic indicator to find overbought and oversold areas, the Stochastic indicator was acting like a filter system. It was filtering false MACD trades by only allowing long and short signals at the over sold and over bought zones respectively. And during the backtest, I noticed that whenever the bullish MACD crossover was below the zero line, the Stochastic was usually in the oversold zone. What this means is, the buy and sell signals we get using MACD strategy, are usually near the oversold and overbought zones. In simple words, the MACD strategy that we have already tested with the zero line rule is better than this.

Number 3. Like other indicators, MACD and Stochastic trading strategy works really good when the market is trending. If you look carefully, you will notice that there is a delay between the Stochastic signal and the MACD signal. And you can also notice that when MACD gives a long entry signal, the Stochastic is already near the overbought zone which can indicate a selling pressure. You can notice a similar pattern in a sell setup. Since this is a trend following strategy and since price goes in one direction in a trending market, indicators like the Stochastic will show patterns like these, and they are completely fine, especially in this case where we are using the stochastic to find the end of a pullback in a trend. But while backtesting, I noticed that in an uptrend, most of the long trades, had a higher profit potential when the stochastic K line, was below the 80 level at the entry candle. Similarly in a down trending market, most trades had a good reward to risk ratio when the stochastic K line was above the 20 level at the time of the entry. So in other words, to improve the MACD and stochastic trading strategy even further, you can filter trades by only taking long entry signals if the K value of the stochastic indicator is below 80. Similarly, you can get better profit potential if you only sell when the k value is above the 20 level.

So after testing the stochastic and MACD strategy 100 times, I got a win rate of approximately 53 percent. Now remember, I tested the strategy with a 1.5 to 1 reward to risk ratio, in other words the profit potential was more than the risk, and because of that, the MACD and Stochastic indicator trading strategy, made a profit of 3250 in this backtest. It had 6 winners in a row and 5 losing trades in a row. The profit graph also looks pretty good when compared with other indicators we have tested on the Trading Rush channel. MACD and Stochastic trading strategy is a profitable strategy. It didn’t achieve a higher win rate like the MACD did on its own, but this strategy is definitely in the top 5 best strategies we have tested so far list. Let’s see how long it can stay in that list, and lets see if other strategies can perform even better when we test them 100 times in the future videos.

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Best Part Of The MACD Indicator Trading

Post author By Trading Rush
Post date July 29, 2020

best part of macd indicator trading strategy

Tag: macd trading strategy

Why the MACD indicator is so popular? I have already made a video on the best MACD strategy, but in that video, I never talk about why MACD is one of the most useful Indicator out there. This video is not about the MACD strategy. In this video, you will learn, how MACD can improve your existing trading strategy, by giving you some really useful information.

Do you find yourself taking trades at the end of the trends? Then this video is for you.

Lets say, when you open a chart of a stock or forex pair, you see this.
Bunch of big red candles in a row. Is this a down trend? If yes, where should you enter your position? Should you enter now?
Well, if you enter now, how do you know the price is not going to reverse as soon as you enter the trade? How do you know if the strength of the trend is still strong or weak?

What If I told you, there is an easy way to identify the strength of the trend?
In the MACD video, I talk about how the crossover of the MACD lines can be used as an entry signal generator. In this video, lets talk about the histogram, and how it can be really useful to analyse the chart better.

Before, we couldn’t tell if the trend was weakening or not. But If we add MACD to this chart, we can see that the MACD is indicating a weakness in the down trend. If you had entered a short position right here, you would have lost because the price went up. Furthermore, the MACD crossover also gave a long entry signal.

But how do these histogram bars show the strength of a trend?
Well, to answer that question, we will have to understand how the MACD indicator actually works.
If you plot the MACD indicator on a chart, it will come with default input settings of 12, 26 and 9.

In simple words, what MACD really does is, compare the average of last 12 candles, with the average of last 26 candles. When it will compare these two averages, it will get a value that will indicate, whether the average of last 12 candles is weak or strong when compared to the last 26 candles.

If that sounds confusing, Lets take a look at another example. Lets say, there is a cat on a ladder. On the first day, the cat climbs 10 steps. On the second day, the cat climbs 40 more steps. On the third day, 20 more steps. On the Fourth day, 10 more. And only 5 more step on the fifth day.

Now, anyone can tell that the cat is climbing upwards. But if you look closely, you can tell that the cat is losing its strength day by day. The cat is getting tired. And finally decides to climb back down.
If you plot the strength of the cat using a histogram. You will see it looks very similar to that of a stock or a Forex pair. In our cat example, you can see how the strength of the cat is decreasing day by day.

MACD’s histogram shows a similar thing. On this chart, one would have said, that this is a strong downtrend. But if we add the MACD indicator, we can see that, although it is a down trend, the strength of the downtrend is getting weaker. If it is getting weaker, there is a chance that the trend could reverse, or give a pullback.
And as you saw earlier, the trend did reverse, and started an uptrend.

Now remember what I said earlier. This is not an entry signal strategy. You cannot trade using the MACD histogram alone. It is better to use it to analyse the strength of the trend, and you can also use it to improve your existing Trading strategy.
Let me give you an example.

Lets say, you found a support area. You are calmly waiting for the price to reach your support area. But then few big red candles show up. These red candles can indicate a possibility of a new down trend.

Instead of getting paranoid, you simply look at the histogram of the MACD indicator. When the price comes near your support area, you see that strength of the downtrend is getting weaker. This is a good sign, as it can indicate a possible buying pressure at or near your support levels.

Once you see the weakness in the downtrend, you simply wait for a proper long entry signal, Like a candlestick pattern, and enter the trade.

In my support and resistance video, I showed a trade I took that made me 1000 percent profit. That’s 10 times what I had risked.
I took that trade near a resistance area. And one of the reasons I knew that the resistance level was still working, was because, using the histogram of the MACD, I saw the trend was getting weaker near the Resistance area.

If you ever find yourself unable to identify the strength of a trend, use the MACD indicator.

Also, In my previous MACD video, I said that MACD is a leading indicator. Some people got confused. How can an indicator be leading? Well, most indicators calculate their values using past data, and show what is currently happening on the chart.

On the other hand, MACD indicator not only relies on past data to calculate its data, but it also predicts the possible change in the direction before other indicators. Because it can predict a possible change in the direction, It is also known as a leading indicator.

In fact, If you plot 26 and 12 period Exponential moving averages, and the MACD indicator on the same chart, you will see that MACD gives an entry signal crossover way before the 26 and 12 period Exponential moving averages.

Well, now you know a little bit more about the MACD indicator. Like the video if you liked it. Maybe Subscribe for more Trading Videos. Check out the Trading Rush Website for more videos, and Thanks for watching. Also thanks to the wonderful Patrons who support the channel on Patreon, You make these videos possible.

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Post author By Trading Rush
Post date July 5, 2020

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