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.
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.
- Price is below 89 EMA and the five moving averages are spreading out nicely. These are signs of a clear trend.
- 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.
- 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.
- 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.
- The MACD indicator increased as the price stayed below 89 EMA.
- 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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