A filtered MACD strategy on the 1 hour chartA 1 hour chart strategy. Presented to you.
When:
- The price is above the 4 hours 100-EMA
- The MACD & Signal(5) lines are below zero
- The MACD (blue) crosses above the Signal (red) line
We buy
When:
- The price is below the 4 hours 100-EMA
- The MACD & Signal(5) lines are above zero
- The MACD (blue) crosses below the Signal (red) line
We sell
To keep in mind:
Specific to EURUSD (but it's almost the same thing with most major pairs that all have the same average true ranges):
Stops are supposed to range from 15 to 40 points, with targets 30 to 80.
The daily ATR ranging from 50 to 150 points.
Anything below 30 pts target is starting to be too small and above 80 points it is too big we're not thinking intraday here.
A quick backtest on EURUSD
And that's already 21 trades for the EURUSD with a winrate of 52.4%, plus the title 5 setups that were a bit cherry picked I won't lie. I didn't even cherry pick them I got lucky on my first try (I thought I was continuing my backtest in July 2017 didn't realize it was on 2020) but I wouldn't expect an 80% winrate in general.
EURUSD: 11 Wins. 10 Loss. 1:2 risk to reward. 52.4% winrate.
Next is GBPUSD
And here is another batch of 21 which is a good sample size.
GBPUSD: 12 Wins. 9 Loss. 1:2 risk to reward. 57.1% winrate.
It is important to zoom out (I know no one does it). A look at the daily chart.
Just going to check quickly because it is getting boring. Should have taken the 5 minutes to make a script to filter this but I'm in too deep to go back now.
And I just noticed I have been backtesting GBPUSD with the 200 EMA. Well nevermind, it is the same thing. Result wouldn't change much.
And here I made the whole box. 12 Wins 19 Loss. Still a winrate of 38.7%.
I can go for worse ones
How about the recent EURUSD price action?
37.5% winrate
If you think it gets immediatly better, here are the next ones:
The findings:
- When the conditions are good it won 55% of the time
- When the conditions are average it won 38% of the time
- When the conditions are bad (range plenty of false trends) it won 10% of the time
With a RR of 2 the breakeven winrate is 33.33%
But we have to include spreads. This strategy goes a bit further than "day trading" so stops and targets are quite wide.
The typical stop/target is something like 25/50 (for EURUSD), the spread is 1 point. Other pairs of course are a bit more expensive.
50/25 = 2
49/26 = 1.88 breakeven winrate = 34.72%
(10+38+55)/3 = 34.33% 🤔 ... Interesting coincidence...
If the risk reward on average is of 1.88 and the winrate is 38% then the profit factor is 38*1.88/62 = 1.15 which is not very high but if the strategy takes a whole lot of small trades it is ok.
The few cases I looked at prove nothing, this might have a blind winrate of 50%, 20%, or 33.33% (most likely).
I don't know how to backtest with tools maybe I should learn so I can clic and let it execute for me... Stay tuned for a tutorial! :D
You would have to execute this strategy when you think the price will trend. But not a very strong trend or there will never be a signal.
An average or weak one, or something that contains trends, like what I have shown and backtested 3 times.
So this means you'd still have to make a directional bet. There is no escape. Sorry no magic trick to avoid it.
A directional bet on the price or on the volatility itself, the trends...
Once you make your directional bet, what is the advantage of day trading with a macd strategy over just taking the trade and holding?
The power of compounding.
Here someone made a backtest on the daily chart for the S&P500, the strategy took 500 trades with a profit factor of 1.2 and returned 95%!
Without counting any spread/commissions. And just holding the S&P during the same period returned 151%. Amazing.
Then what is it that gets compounded with technical day trading? Easy. Losses & costs. Also causes to miss out when right about the direction.
Lots of inconvenients, and no advantages. Sounds amazing. The power of COMPOUNDING™.
Ye I'm not sold. There might be a tiny edge but it's just so worthless. Picking pennies...
Got to imagine the amount of desperation to make any profit anyone would have to try that.
And they'd probably end up losing. Why did I waste my time?
