MA 4H MACD Swing Forex Trading Strategy

0
908

MA 4H MACD Swing Forex Trading Strategy

Often, when traders first get into trading, they get drawn towards either day trading or scalping. It might be because the allure of being a “day trader” seems so cool or maybe people just get drawn towards making a quick buck. However, many traders who have been trading for quite some time would often say that scalping and day trading is very hard. To some extent, this is true. On the smaller timeframes, the market could move so erratically, plus the fact that you’d have to overcome the hurdle of trading costs with very little profit increments. It is like being a rookie thrown into an all-star game.

Better to start with something that might not be as difficult. Better to start with a simple swing trading strategy.

Moving Average Crossovers

One of the most basic strategies in trading is the moving average crossover.

Moving averages are typically used to determine a trend direction. This is done in different ways. It could be determined by identifying the location of price in relation to a moving average. A trader could also make use of the slope of a moving average to identify the direction of the trend. Or a trader could also make use of two or more moving averages and identifying the location of the faster moving average in relation to a slower moving average, or simply looking at how the moving averages are stacked.

Logically, if a trader is identifying trend direction using the last method mentioned, identifying the location of a faster moving average in relation to a slower moving average, it could be argued that the crossover of the two moving averages is the start of a new trend.

With crossover strategies, a trader makes use of two moving averages, a slower moving average and a faster moving average. Whenever the faster moving averages crosses above the slower moving average, the hypothesis is that the market is starting a bullish trend, and if it crosses below the slower moving average, then the market is becoming bearish.

Moving Average Convergence and Divergence (MACD)

The Moving Average Convergence and Divergence (MACD) is an oscillating indicator that tries to identify momentum and trend direction. It may look like it is based on a complex mathematical computation, however it is simply based on moving averages. It is in fact based on the difference of moving averages.

Since the MACD is based on the difference of moving averages, if the faster moving average is above the slower moving average, it prints positive histograms. On the other hand, if the faster moving average is below the slower moving average, it would print a negative histogram. If you come to think of it, the MACD’s histograms is actually a crossover signal.

Trading Strategy Concept

This simple strategy aims to make use of the MA 4H custom indicator, which is an indicator based on a moving average crossover. However, this indicator is specifically preset to be used for swing trading strategies.

The same standard crossover will be used. The green line represents the slower moving average while the red line represents the faster moving average. If the red line crosses above the green line, then the market is said to be bullish. If it crosses below the green line, then the market is said to be bearish.

This method will be used in tandem with the standard MACD indicator with default parameters. However, we will be focusing on the histogram bars as our main signal. We will be looking at when the histogram bars would be crossing the zero line. If the histogram bar crosses above zero, then the market is said to be bullish, while if it crosses below zero, then the market is said to be bearish.

Indicators:

  • MA-4H
  • MACD

Timeframe: 4-hour chart only

Currency Pair: any

Trading Session: any

Buy (Long) Trade Setup

Entry

  • MA-4H: the red line should cross above the green line indicating the start of a probable bullish trend
  • MACD: the MACD histogram should cross above zero confirming the start of a probable bullish trend
  • Open a buy trade order on the confluence of the above conditions

Stop Loss

  • Set the stop loss below the moving averages

Exit

  • Close the trade as soon as the MA-4H’s red line crosses below the green line

Sell (Short) Trade Setup

Entry

  • MA-4H: the red line should cross below the green line indicating the start of a probable bearish trend
  • MACD: the MACD histogram should cross below zero confirming the start of a probable bearish trend
  • Open a sell trade order on the confluence of the above conditions

Stop Loss

  • Set the stop loss above the moving averages

Exit

  • Close the trade as soon as the MA-4H’s red line crosses above the green line

Conclusion

This strategy is a simple crossover swing trading strategy, which new traders could start with.

It does not provide perfect signals with no losses. However, it allows traders to catch big trending waves. These big trending waves should allow for a reward-risk ratio of more than 2:1.

The advantage of this strategy is that it causes traders to wait for the confirmation of the MACD prior to entering the trade, which somehow filters out some of the false signals generated during choppy market conditions.

Recommended MT4 Broker

  • Free $50 To Start Trading Instantly! (Withdrawable Profit)
  • Deposit Bonus up to $5,000
  • Unlimited Loyalty Program
  • Award Winning Forex Broker
  • Additional Exclusive Bonuses Throughout The Year

Recommended broker

>> Claim Your $50 Bonus Here <<

Click here below to download:

Save

Save



Get Download Access

LEAVE A REPLY

Please enter your comment!
Please enter your name here