3 MA + MACD Trend Follower" trading strategy
In the New Year's issue of the magazine ForTrader.ru we invite you to consider trading strategy for which works on crossing of several moving averagesfiltered by the popular indicator MACD. The trading strategy was suggested to us by a forum participant machzelet. It would seem that all possible options of trading on the crossover of sliding and MACD have been tried and not all of them gave at least a good result. However, we will try to do some research in the hope that even "an unloaded gun ever fires.
Rules of the trading strategy
Since the trading strategy uses averaging indicators, we choose highly volatile currency pairs to avoid flat movements. Let's choose the following pairs for our study EURUSD. We take an intraday timeframe, i.e. hourly (H1).
Strategy indicatorsas stated above, averaging:
- LWMA75 applied to Low;
- LWMA85 applied to Low;
- EMA5 applied to Close;
- MACD(15,26,1) applied to Close.
The signal to enter the market to buy:
- EMA5 crosses LWMA75 and LWMA85 from bottom to top;
- The MACD indicator is above 0.
The signal to enter the market to sell:
- EMA5 crosses LWMA75 and LWMA85 from top to bottom;
- The MACD indicator is below 0.
Support orders:
- StopLoss is set at 50 pips;
- We use a TakeProfit of 300 pips;
- On reaching 50 points profit StopLoss goes to breakeven.
Important: Always open only one warrant!
If the signal turned out to be "false", that is, it did not reach the breakeven level and did not close at StopLoss, and a new signal has already been formed, then the current order not closes, and continues to trade until it closes on one of the stop orders.
Money Management:
- In trading, you need to consider the percentage of risk per order;
- The lot is calculated from the ratio of the risk percentage to the deposit and StopLoss by the formula
Lot = (Deposit * Risk Percentage * Risk Factor) / StopLoss
Important: The minimum lot is 0.01, the maximum is 10.
Here is an example: Deposit = 1000; Stop Loss = 50; Risk Percentage = 5 (100% = 1, so 5% = 0.05); Risk Ratio = 0.1 (constant value, does not change); Lot = (1000 * 0.05 * 0.1) / 50 = 0.1.
Fig. 1. Example of making a sale transaction.
Fig. 2. Example of a Buy deal.
Testing a trading strategy
So, we have the rules of the proposed strategy, now let's move on to testing. As usual, let's start with testing the tactics according to the author's rules. We will test it on the EURUSD, on the hourly chart during the period from 2006 to December 17, 2010.
Fig. 3. Testing the trading strategy according to the author's rules. Download the report
Well, the result has not surprised anyone yet. It turned out to be extremely unstable - large profits were leveled by several losses. As a result, we have practically no profit, but periods of negative trading can undermine all the hopes of manual trading. Let's move on to Optimize your trading strategy.
Optimizing the trading expert
Optimization of the Expert Advisor is conducted on the same EURUSD pair on the hourly chart for the period from 1999 until December 17, 2010. The period of optimization from 2006 to 2007 is marked with a square in Figure 4. A complete list of parameters obtained during the optimization can be found in the testing report.
Fig. 4. Optimization and forward testing of the trading strategy. Download the report
We also conducted another experiment. The author asked in his description not to limit the work of the Expert Advisor by time, but we still decided to look for the best trading hours of the strategy. This is the result we can get if we limit the signal search time to 16:00-07:00.
Fig. 5. Time-limited Expert Advisor trading. Download the report
To summarize
The initial parameters of the strategy are neither loss-making nor profitable, in this form it is hardly worth using it on a real account - only time will be lost. However, the strategy has a nice zest and the optimization has shown it. It is possible to find the optimal results for the positive work and use them quite successfully.
Download Expert | Discuss on forum
New Year's bonus
As you know, in the 63rd issue we explored a strategy to deviation from the average. We were able to significantly improve the results of this strategy by adding a time limit. The Expert Advisor also works well on other currency pairs. You can download the following Expert Advisor here.