FT MACD Scalper - a new technique for market analysis
In the 77th issue of ForTrader.org we will look at scalping strategy with a new method of market analysis, which we have never seen before in our trading practice. We will work with the same standard trading indicators, and this doubly increases the interest in the results. We hope we have intrigued you. Well, let's begin.
Tools for work
- Currency pair: AUDUSD and others
- Timeframe: М30
- Indicators: MACD(24, 52, 18), EMA(100)
- Terminal: MetaTrader 4
- Deposit: 1000$
As you can see, it's true, we do not offer you anything new in the toolbox, so let's go straight to the rules.
Rules of the trading strategy
Despite the fact that the strategy states a moving average, we will not use it, you can find out what it is for in the full version of the strategy. So we just put the MACD on the chart and start analyzing.
FirstWhat we need is to find two working zones. These will be the two closest MACD movements: one "hill" above the zero mark and one below.
The second step: in the "hills" found, we look for the highest (for upward) and the lowest (for downward) bar, respectively.
The third step: explore the price bars corresponding to the bars MACD. Для бара, соответствующего самому высокому значению диапазона MACD, отмечаем значение открытия, для бара, соответствующего самому низкому значению второго диапазона, – цену закрытия.
Step Four: draw a horizontal channel on the found points.
Step Five: We wait for the breakdown of the channel. For this purpose we expose the pending orders on borders of the channel. After opening of the transaction, we delete the opposite order and watch the position.
Closing rules The author of the strategy was not suggested, so ForTrader.org experts suggested that we track the further MACD movement as a variant. Thus, for a sell trade, we track the downward movement: as soon as there is a reversal, i.e. the bar has closed below the previous one, we close the position. The opposite rules are true for a buy trade.
Let's see what we end up with.
Testing a trading strategy
С правилами мы определились, самое время посмотреть на реализацию. Для начала протестируем авторские правила стратегии. Для этого используем пару AUDUSD и M30, работа 0,01 лотом и период 2012.08.23 – 2013.09.27.
As we can see, the strategy clearly has potential. Despite the long period of almost no profit, as well as a small drawdown, only 3.5%, profit was still formed, and this can not but rejoice - it rarely happens just before optimization.
However, it should be noted that in spite of the significant preponderance of profitable positions against loss-making ones, the amount of loss-making positions is higher, which means that either we close on a correction, which is quite possible taking into account the MACD rules, or the pullbacks after the zero crossing by the indicator are too frequent. The second variant is much less believable, so we suggest taking StopLoss and TakeProfit as optimization parameters.
Of course, such levels are not stated in the rules, and it would be difficult to consider always correct values selected by optimizing, nevertheless, let us try at least in order to make the necessary conclusions.
We used the same initial parameters to work, but we get a completely unusual result. It turns out that the strategy, to work profitably, requires a stop loss 16 times less than the take profit, which once again proves the fact that our MACD close is late.
Besides, using strict SL and TP levels, we have eliminated such a situation as a deal closing after the MACD reversal and getting as a consequence a strong minus. In fact we have a clear rule: if a deal has been closed on a short SL, it is just a false signal. And this is the direction in which the tactic should be developed.
In the end, the ForTrader.org experts are very satisfied with the results. Despite the fact that the profit was not very stable, there is reason for further research, and this is a direct path to a good working strategy. While we and hopefully you are looking for interesting modifications of the TS, let us try to test the current version. Naturally, on the demo account. Watch the results!