What Is The Best MACD Trading Strategy

Best MACD Trading Strategy – The
moving average convergence divergence (MACD) oscillator is one of the
most popular technical indicators.

Though
it is not useful for intraday trading, the MACD can be applied to
daily, weekly or monthly price charts.

The basic MACD trading strategy
uses a two-moving-averages system, one 12-period and one 26-period along with a nine day exponential moving average (EMA) that serves to
produce clear trading signals.

The interaction between the two moving
averages line, its own nine day EMA and the basic price action serves as
the foundation for MACD interpretation.

Best MACD Trading Strategy

The correct way to use MACD is to always use it when it gives an buy or sell signal.

Example

The MACD crossover of the given stock in the picture has happened at 937. MACD has given a downtrend signal at 937.

Now the first thing you have to do is to wait for one more candle ahead of the MACD crossover, and that candle should be red, now you have to trade at the low of this candle i.e. 930.50.

Here you place a sell order and decide your target price. I generally leave it with a 1% profit. You can set the target according to your own.

Let us give you another example, see in the picture below when the MACD crossover happened.

MACD crossover has occurred at 105 and is a buy signal. Now you have to wait for a candle after the MACD crossover and if it is green then you have to place a buy trade at the high of that candle.

Here I have used a 2-hour time frame. After taking the entry, you can decide your profit according to your risk taking capacity.

I generally walk away with a profit of 1%. You have to keep in mind that you must put a stop loss in both the given examples.

If you are buying then place your stop loss at the low of the candle on which you have bought and if you are selling then place your stop loss at the high of the candle on which you have sold.

Here you have to take care of few things.

1) First of all, don’t use MACD for intraday trading, use it for swing trading or long-term trending.

2) Time frame is most important while using MACD, so always keep a time frame of 30 minutes or 2 hours, or 1 day.

3) Do not trade immediately after the MACD crossover, wait for another candle to form after the crossover and then enter the trade at the low or high of that candle.

If there is a sell signal then enter at low and if it is a buy signal then trade at high.

The MACD has many
strengths, but it is not infallible and struggles, particularly in
sideways markets.

Since the MACD is based on underlying price points,
overbought and oversold signals are not as effective as a pure
volume-based oscillator.

Always use other technical tools to confirm
signals produced by the MACD, as it is the ability to work in
conjunction with so many other tools that gives the MACD its
reliability.

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