4 Hour MACD Forex Strategy.pdf

4 Hour MACD Forex Strategy

Welcome to the 4 Hour MACD Forex Strategy. This strategy is aimed at

simplicity as well as high probability trades. I have been in the equity market for

almost ten years now and in the forex market for two years. I learned very early that

forex trading is not for the shaky ones. One must have a tested and definite trading

strategy as well as well organized discipline to follow the strategy and execute the

plan as to the letter. One must be exact and precise.

Therefore I paper traded for almost two years and read everything I could lay

my hands on. I bought books and courses. I attend a 5 day live web seminar. All this

did not help me at all as it did not fit my style of personality and I just did not seem to

connect with all this different strategies. Over two years of watching the graphs with

different indicators, moving averages etc. I started to get a feeling for the movement

and motion of the market especially the EurUsd around certain moving averages.

It wasn’t till late last year that I discover a setting with the MACD that gives

easy to read signals on a regular basis on a 4 hour timeframe. I like the 4 hour

timeframe as one are not glued to the screen full time.

If you look at FIG 1 below you will see that there were 14 signals over a

period of 5 weeks. Within that period of FIG 1 the signals given were pretty good.

There are times when some signals does not produce positive results. I then had to

work on a filter system to only let me take the best ones. I found that the MACD

when moving in a certain way produces a 95% accuracy. I will show you later how

the high probability trades look like.

In FIG 1 the signals are shown and FIG 2 shows that an entry is made after

the 4 hour bar has closed and at the opening of the next bar.

In FIG 3 another 19 deals were shown of which the last one was not finished

yet so out of a total of 18 trades 5 were wrong and 13 were right.

As it is a 4 hour strategy it means sometimes setting the alarm clock to catch

an entry in the early morning hours. What makes it nice is that one will know after the

close of a 4 hour bar whether the next 4 hour bar might close as a signal by just

following the MACD. Therefore one can set an alarm at that time.

Have a look at FIG 1 to 3.

Disclaimer:

As trading in the Forex market is very risky, the reader if going beyond this

point and applying the concepts and methods describing in this document do so on

his or her own will and risk. The writer and or anyone involved in the compiling of

this document will not be held responsible for any losses incurred by using the

methods described in this document as no money management nor stoploss levels are

discussed as it vary from trader to trader according to there own risk and capital

profiles.

FIGURE 1

FIGURE 3

This was just to see and get a feeling for the graphs. Let us start to set-up our charts.

Moving Averages:

First of all are the moving Averages that we are going to use.

1. 365 Exponential Moving Average (365EMA)

2. 200 Simple Moving Average (200SMA)

3. 89 Simple Moving Average (89SMA)

4. 21 Exponential Moving Average (21EMA)

5. 8 Exponential Moving Average (8EMA)

MACD:

MACD settings at

1. Fast EMA 5

2. Slow EMA 13

3. MACD EMA 1

Horizontal Lines:

Three sets of horizontal lines above and below zero should be drawn on the MACD

window at levels as well as one on zero

1. Level +0.0015

2. Level +0.0030

3. Level +0.0045

4. Level –0.0015

5. Level –0.0030

6. Level –0.0045

Your Graph should look like this: (Choose your own colour and styles)

The MACD moves in certain patterns that when recognized can be very profitable

trades. Let me show you the very important ones first. By not following every signal

but only the ones that gives high probability trades through certain MACD patterns

serves as a filter. The ones not familiar are not taken. This is the filter.

This pattern comes very regular especially A and D as the MACD has moved beyond

the 0.0045 level and are due for a correction and or trend reversal. B and C are trend

continuing patterns and are entered in the direction of the trend. Red circles indicates

entry signal and entry is made on the opening of the next bar.

The head and shoulder is another definite.

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