Price Action MACD Strategy: Rules and BackTest Results

21 Jul 2018

Take it as educational unless you understand the details of this strategy. I suggest you to backtest yourself, to understand entries and exits, before putting it in your trading repertoire.

Rules:
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Only Long trades when price > 55 EMA
Only short trades when price < 55 EMA

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Time Frame 1H

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Long Entry Preconditions:

a) Price above 55 EMA
b) MACD histogram above zero line
--Positive Divergence seen on MACD signal line (a complementary condition for High probability Entries)

Long Entry Trigger:

Price break above Significant peak fractal of previous downwave OR the break above prior peak fractal high.


Exit Strategy or Stop:

Type 1 Exit

Precondition: Negative Divergence seen on MACD signal line; and
Trigger: Break below a consolidation level or the prior minor swing low


Type 2 Exit

Hourly close below 55 EMA

Exit type I or type II whichever comes earlier

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Short Entry Preconditions:

a) Price below 55 EMA
b) MACD histogram below zero line
--Negative Divergence seen on MACD signal line (a complementary condition for High probability Entries)

Short Entry Trigger:

Price break below Significant fractal of previous upwave OR the break below prior swing fractal low.


Exit Strategy or Stop:

Type 1 Exit

Precondition: Positive Divergence seen on MACD signal line; and
Trigger: Break above a consolidation level or the prior minor swing high


Type 2 Exit

Hourly close above 55 EMA

Exit type I or type II whichever comes earlier

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# If trade exited but price shoots back piercing out of 55 EMA or is already above/below 55 EMA , a break of previous peak fractal with MACD histogram above/below zero line triggers entry again.
# Exit Strategy discussed above works well in long trades but chops in short trades. Tweaking a little by taking 1:1 or smaller targets (to previous support zones) instead of the Exit strategy may help in this issue.


Backtesting From Jun till 20th July:

*10558 SL 10626 = -68
10771 E10830 = 59
*10755 SL 10782 = -27
10810 SL 10758 = -52
*10732 E10570 = 162
10737 E10999 = 262
Net= +336
Results suggest that this strategy is too good in a trending market. Side ways market may give breakeven trades.
#Trades with asterisk mark are short.

Currently No trigger but bearish divergence on MACD

# Older results in the following post

Enough testing, now its time to trust this strategy.
Enjoy the weekend
Regards