THIS TRADING STRATEGY USES FIVE MOVING AVERAGES AS SUPPORT AND RESISTANCE POINTS. SET THEM UP:

• 365 exponential moving average (EMA)
• 200 simple moving average (SMA)
• 89 SMA
• 21 EMA
• 8 EMA

WE ARE NOT FORGETTING THE NAMESAKE OF THIS TRADING STRATEGY. THE SETTINGS FOR MACD ARE:

• 5 for fast EMA
• 13 for slow EMA
• 1 for the signal line
• Add horizontal lines at 0.0015, 0.003, 0.0045, -0.0015, -0.003, and -0.0045

RULES FOR 4-HOUR MACD FOREX TRADING STRATEGY

There are many possible setups with this strategy. The trend continuation setup was recommended by Philip Nel. I came up with trading rules to trade continuations after interpreting the strategy. The need to look for chart patterns was side-stepped by these rules.

LONG TRADE

1. Price is above 89 EMA
2. MACD is above zero
3. MACD falls
4. Buy once MACD rises (if MACD is still above zero)

SHORT TRADE

1. Price is below 89 EMA
2. MACD is below zero
3. MACD rises
4. Sell once MACD falls (if MACD is still below zero)

4-HOUR MACD FOREX TRADING EXAMPLES

WINNING TRADE – SHORT TRADE

There are five moving averages in different colors on this 4-hour chart of the 6A futures. The background color of the indicator shows whether the indicator is increasing or decreasing. The horizontal lines are not being used for our review.

After two days of consolidation, this chart shows a continuation.

1. Price is below 89 EMA and the five moving averages are spreading out nicely. These are signs of a clear trend.
2. Shortly after the strong bear thrust bar, the MACD started to rise. Before the MACD rose above zero, it decreased and gave us a short signal. This short trade brought the trend past the earlier extreme.
3. Look at the price action during the MACD pullback. Price was in a tight trading range with narrow bars and several false break-outs. In this case, the MACD added value by uncovering the bullish momentum to keep us out of the market until the momentum turned bearish.

LOSING TRADE – SHORT TRADE

There is a 4-hour chart of the 6J futures contract. It shows the end of the trend.

1. This pullback was deeper than the earlier pullbacks. As the down trend has been effective for a long period, this complex pullback was expected, and perhaps even necessary for the trend to continue.
2. The MACD indicator increased as price stayed below 89 EMA.
3. The moving averages rejected price down. The price action supported the short MACD signal. However, the trade did not turn out well.

We might have a winning trade if we have a wider stop and a conservative target. The bullish bar should have stopped most traders.

REVIEW – 4-HOUR MACD FOREX TRADING STRATEGY

This strategy is similar to the 5-minute MOMO trade and Elder’s Impulse System. The common denominator of these trading strategies is the MACD.

The signal line is removed by the setting of the MACD indicator. The MACD has become a price indicator.

The five moving averages are too much for me. They cluttered the charts with their support and resistance framework.

This strategy is effective in picking up trading setups. It is a good starting point for momentum trading. The time is 4 hours and above.

The 4-hour time-frame splits a 24 hour session into 6 bars. If you want to have more fun with this strategy, try it on the daily chart.

We focused on trading trend continuations in our review. The last extreme of the trend should be avoided. The principle of momentum preceding price is used in this strategy. If price has gone beyond the last trend extreme, then it has caught up with the rest of the market. The sweet spot of our trade timing is gone.

The trading strategy presents more opportunities than we looked at. Everything you need to know about this trading strategy can be found in the thousand-page forum thread.

Philip Nel has trade management advice. If the stop-loss is too far away, he scales into a position. It is an interesting idea to explore.

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