Profitable strategy MACD + Stochastic

Profitable strategy MACD + Stochastic

The stochastic oscillator and the moving average convergence divergence (MACD) are two indicators that work well together.

The stochastic oscillator compares a stock’s closing price to its price range over a period of time. Its K line indicates the number of time periods, and its D line is the moving average of the K line. When the K line drops below 20, the stock is oversold, and it indicates a buying signal. If the K peaks just below 100 then retreats, the stock should be sold before the value drops below 80. And generally, when the K value rises above the D, it’s a buy signal as long as the values are below 80. If they are higher than 80, the security is overbought.

MACD indicates price trends and direction. Subtract a security’s 26-day exponential moving average from its 12-day moving average to create an oscillating indicator value. The trigger line is the nine-day EMA.

If MACD value is higher than the nine-day EMA, it’s a bullish moving average crossover. A bullish signal occurs when a faster moving average crosses above a slower moving average, creating market momentum and signaling more price increases.

When using the stochastic oscillator and MACD together, look for bullish crossovers that occur within two days of each other. MACD should cross slightly after the stochastic. Otherwise, a false price trend indication may appear.

The MACD Stochastic Forex Trading Strategy is a trading system based on two MT4 indicators:

  • MACD (standart settings)
  • stochastic oscillator (standart settings)

The MACD indicator in this strategy is used as a filter to avoid the false trading signals whilst the stochastic oscillator indicator is generates the buy and the sell signal.

Currency Pairs: Any

Timeframes: Preferably the 1hr and upwards

Buying Rules

Buying on uptrend

  1. MACD must be above the 0.0 level and this indicates an uptrend.
  2. stochastic indicator must have a cross over at oversold region which is around the level 20 line as shown on the chart above.
  3. On the high of the candlestick that corresponds the two lines of stochastic crossing over, place a buy stop order a minimum of 2 pips above its high.
  4. Place your stop loss at least 2-5 pips below the low of that candlestick but if you see that it is going to be too close to the entry price, then look for the nearest swing low and place it 2 pips below its low.
  5. Aim for a risk:reward of 1:2 or above for your take profit target. Another option is to use the previous swing high as your take profit target level.

Selling Rules

Selling on downtrend

  1. MACD must be below the 0.0 level, this indicates a downtrend.
  2. stochastic indicator must have a cross over at overbought region which is around the level 80 line as shown on the chart above.
  3. On the low of the candlestick that corresponds the two lines of stochastic crossing over, place a sell stop order a minimum of 2 pips below its low.
  4. Place your stop loss at least 2-5 pips above the high of that candlestick but if you see that it is going to be too close to the entry price, then look for the nearest swing high and place it 2 pips above it.
  5. Aim for a risk:reward of 1:2 or above for your take profit target. Another option is to use the previous swing low as your take profit target level.

You can also watch video on youtube : https://youtu.be/s-0eEN_l6dQ

Wish you success in trading and profit !

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