Take profit target at pips. Move trailing stop to break even at 50 pips.
The trade setup candlestick is the candle that touches the 15 ema OR passes through it but makes a higher high, which means, it breaks the high of the previous candlestick. On this candlestick, you set a buy stop order pips allow for spread above its high to catch the upward breakout if it happens. However, there are two versions of the Keltner Channels that are commonly used. Admiral Keltner is possibly the best version of the indicator in the open market, as the bands are derived from the Average True Range ATR.
At those zones, the squeeze has started.
Trading strategy: MACD Triple
To better validate a potential squeeze breakout entry, we need to add the MACD indicator. Wait for a candle that breaks above or below the bands, as a buy or sell trade trigger confirmed by the MACD.
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Using these two indicators together is stronger than only using a single indicator, whereas both indicators should be used together. In this trading method, the MACD is used as a momentum indicator, filtering false breakouts. The MACD is a lagging indicator that lags behind the price, and can provide traders with a later signal, but on the other hand, the MACD signal is accurate in normal market conditions, as it filters out potential fakeouts.
With the best MACD settings for day trading, using it as a signal in this regard can be highly beneficial. Another example is shown below. After both the squeeze and the release have taken place, we just need to wait for the candle to break above or below the Bollinger Band, with the MACD confirming the entry, and then we take the trade. Recommended time frames for the strategy are MD1 charts. The strategy can be applied to any instrument. Intraday breakout trading is mostly performed on M30 and H1 charts.
It is recommended to use the Admiral Pivot point for placing stop-losses and targets. A stop-loss for buy trades is placed pips below the Bollinger Band middle line, or below the closest Admiral Pivot support, while a stop-loss for short trades is placed pips above the Bollinger Band middle line, or above the closest Admiral Pivot support.
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Target levels are calculated with the Admiral Pivot indicator. Both settings can be changed easily in the indicator itself. When we apply 5,13,1 instead of the standard 12,26,9 settings, we can achieve a visual representation of the MACD patterns. These patterns could be applied to various trading strategies and systems, as an additional filter for taking trade entries.
A possible entry is made after the pattern has been completed, at the open of the next bar. A bullish continuation pattern marks an upside trend continuation. A bearish continuation pattern marks an upside trend continuation. When the MACD comes down towards the Zero line and turns back up just above the Zero line, it is normally a trend continuation move. Points A and B mark the uptrend continuation. When the MACD comes up towards the Zero line and turns back down just below the Zero line, it is normally a trend continuation move.
Points A and B mark the downtrend continuation. By using MACD the right way, you should hopefully empower your trading knowledge and bring your trading to the next level! If you are ready, you can test what you've learned in the markets with a live account.
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- The strategy in detail?
If you need some practice first, you can do so with a demo trading account. Demo trading accounts enable traders to trade in a risk-free trading environment, whereby traders use virtual funds so that their capital is not at risk. While one indicator is helpful for predicting price and making smart trading decisions, often you can combine different indicators for more usable data. Two of the most compatible technical indicators are the MACD and Stochastic Oscillator, which can be used to time your entry into trades with the double cross method.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
We use cookies to give you the best possible experience on our website. By continuing to browse this site, you give consent for cookies to be used. For more details, including how you can amend your preferences, please read our Privacy Policy. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Therefore, we stay with our position until the signal line of the MACD breaks the trigger line in the opposite direction.
MACD Indicator Settings Plus Trading Strategy
The below image illustrates this strategy:. This is the minute chart of Bank of America. This position would have brought us profits of 60 cents per share for about 6 hours of work. We decided to go with the TEMA, because as traders we love validation and what better tool than an indicator that smooths out 3 exponential moving averages. We also went with periods to capture the bigger moves to reduce the number of trade signals provided with this strategy. Although the TEMA can produce more signals in a choppy market, we will use the moving average convergence divergence to filter these down to the ones with the highest probability of success.
This is the minute chart of Twitter. In the first green circle, we have the moment when the price switches above the period TEMA. This is when we open our long position. The price increases and in about 5 hours we get our first closing signal from the MACD stock indicator. This trade would have brought us a total profit of 75 cents per share.
To learn more about the TEMA indicator, please read this article. Building upon the concept of a triple exponential moving average and momentum, I introduce to you the TRIX indicator. To learn more about the TRIX, please read this article. This time, we are going to match crossovers of the moving average convergence divergence formula and when the TRIX indicator crosses the zero level.
When we match these two signals, we will enter the market and await the stock price to start trending. This is the tighter and more secure exit strategy. We exit the market right after the trigger line breaks the MACD in the opposite direction. This is a riskier exit strategy because if there is a significant change in trend, we are in our position until the zero line of the TRIX is broken.
Since the TRIX is a lagging indicator, it might take a while for that to happen. At the end of the day, your trading style will determine which option best meets your requirements. Now look at this example, where I show the two cases:. This is the minute chart of eBay. The first green circle shows our first long signal, which comes from the MACD stock indicator. The second green circle highlights when the TRIX breaks zero and we enter a long position. The two red circles show the contrary signals from each indicator. Note in the first case, the moving average convergence divergence gives us the option for an early exit, while in the second case, the TRIX keeps us in our position.
Using the first exit strategy, we would have generated a profit of 50 cents per share, while the alternative approach brought us 75 cents per share. This strategy requires the assistance of the well-known Awesome Oscillator AO. To learn more about the awesome oscillator, please visit this article. We will both enter and exit the market only when we receive a signal from the MACD stock indicator, confirmed by a signal from the AO.
The challenging part of this strategy is that often we will receive only one signal for entry or exit, but not a confirming signal. Have a look at the example below:. This is the minute chart of Boeing. The two green circles give us the signals we need to open a long position. After going long, the awesome oscillator suddenly gives us a contrary signal. Yet, the moving average convergence divergence does not produce a bearish crossover, so we stay in our long position. The first red circle highlights when the MACD has a bearish signal.
The second red circle highlights the bearish signal generated by the AO and we close our long position. Furthermore, notice that during our long position, the moving average convergence divergence gives us a few bearish signals. Yet, we hold the long position since the AO is pretty strong. I often get this question as it relates to day trading. The simple answer is yes, the MACD trading strategy can be used to day trade any security.
Using The MACD Indicator And Best Settings
The MACD stock indicator is based on whatever time frame you are trading. The one thing you should be concerned about is the level of volatility a stock or futures contract exhibits. The greater the volatility, the less likely the MACD stock indicator or any other indicator, for that matter, will accurately forecast price movement.
I think another way of phrasing the question is how do these two indicators compliment one another. You can use the moving average as a means to validate the price move with the MACD trading strategy.