Trading strategy: MACD Triple

Description

The MACD Triple strategy is a typical multiple time frames strategy. These strategies base themselves on one or more technical indicators which are analyzed in parallel in different but related time frames. The higher time frames usually serve as a trend filter for the signals. The lowest time frame usually provides the trading signal.

 

  
Suitable for : Market indices (DAX, CAC, DOW...)
: Forex (EUR/USD ...)
: Commodities (Oil, Gold, ...)
: Stocks
Instruments : Futures, CFDs, Forex
Trading type : Day trading
Trading tempo : 0-3 signals per day on a 15’ chart
Using NanoTrader Full : Manual or (semi-)automated

 

The strategy in detail

The MACD Triple strategy bases itself on the moving average convergence divergence indicator (MACD - 12,26,9). The MACD is analyzed in three time frames: 4 hours, 1 hour and 15 minutes. Notice that the ratio of each time frame to the next is 4:1. The 1-hour and 4-hour MACDs serve as trend filters. The 15-minute MACD gives the buy and short sell signals.

When to open a position?

The 15-minute MACD gives a buy signal when the fast MACD leg (12) crosses the slow MACD leg (26) upwards. The 15-minute MACD chart gives a short sell signal when the fast MACD leg crosses the slow MACD leg downwards.

Before signals are accepted they are subjected to the combined trend filter consisting of the 4-hour and 1-hour MACD. If both are bullish, only buy signals are accepted. If both are bearish only short sell signals are accepted. If one is bullish and the other is bearish, all signals are rejected.

The strategy also incorporates a time filter. The time filter accepts signals from 08h00 to 21h30. Signals outside this time period are rejected.

When to close a position?

The MACD Triple strategy uses both a stop and a profit target. In both cases they are percentages. The stop is at a distance of 0,50% from the entry price. The profit target is at a distance of 1,50% from the entry price.

Open positions can also be closed when the reverse signal appears i.e. when the 15-minute MACD crosses back in the opposite direction. Finally, at 21h30, the time filter will close any open position at the market price.

 

This example shows a day with two buy signals. Below the main chart are the three MACDs. The green background in the chart indicates that both the 1-hour and 4-hour MACDs are bullish. Only buy signals will be accepted. The fast leg of the 15-minute MACD crosses the slow leg upwards generating a buy signal. The stop (red line) and profit target (green line) appear automatically when the position is opened. In both cases the open position is closed with a profit when the 15-minute MACD crosses back in the opposite direction.


 

This example shows a short sell signal. Below the main chart are the three MACDs. The red background in the chart indicates that both the 1-hour and 4-hour MACDs are bearish. Only short sell signals will be accepted. The fast leg of the 15-minute MACD crosses the slow leg downwards generating a short sell signal. The stop (red line) and profit target (green line) appear automatically when the position is opened. The market price nearly reaches the profit target around 14h00. The open position is closed a bit later when the 15-minute MACD crosses back in the opposite direction.


 

This example shows a day with two short sell signals. Below the main chart are the three MACDs. The red background in the chart indicates that both the 1-hour and 4-hour MACDs are bearish. Only short sell signals will be accepted. The fast leg of the 15-minute MACD crosses the slow leg downwards generating a short sell signal. The stop (red line) and profit target (green line) appear automatically when the position is opened. In both cases the open position is closed when the 15-minute MACD crosses back in the opposite direction.


The results of the MACD Triple strategy vary. These screenshots show back-tests over a 7-year horizon for a number of market indices and commodities. The strategy can be applied to all instruments so you can back-test and optimize whatever you are interested in.

 

The results on the Brent crude oil.


 

The results on the German market index DAX.


 

The results on U.K. market index FTSE.


 

The results on the Netherlands market index AEX.


 

The results on the French market index CAC40.


 

The results on the U.S. market index S&P 500.


 

The results on the EUR/USD currency pair.

 

Conclusion

The MACD Triple strategy is a typical multiple time frames strategy. Combining multiple time frames usually seems to yield good results in trading. Traders should look into such strategies. The MACD Triple strategy can be used for market indices, stocks, forex and commodities. The strategy is a day trading strategy but days without signals are not uncommon.

Practical implementation

In NanoTrader Full follow these steps:
  • Choose the instrument you wish to trade.

  • Open a chart with the template study "WHS MACD Triple".

  • Semi-automated trading? Simply activate the TradeGuard+AutoOrder or the AutoOrder function.