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By Rog... on May 27, 2022 View Files Download

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4 Hour MACD Forex Strategy

Learn: Trading with MACD

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

This MACD forex trading strategy has many possible setups. Philip Nel recommended trend continuation setups for beginners. I interpreted the strategy and came up with the following trading rules to trade continuations. These rules side-stepped the need to look for chart patterns.

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)

Winning Trade – Short Trade

This is a 4-hour chart of the 6A futures (AUD/USD) with the five moving averages in different colors. The background color of the MACD indicator shows if MACD is increasing or decreasing. I left out the horizontal lines as we are not using them for our review.

This chart shows a trend continuation after around two days of consolidation.

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

This is a 4-hour chart of the 6J futures contract (JYP/USD). It shows the end of a long downtrend. 

1. This pullback was deeper than the earlier pullbacks. As the downtrend 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 the 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.

Given a wider stop and a conservative target, we might have a winning trade. However, the bullish bar (three bars after entry) should have stopped most traders.

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