Trading is a game of large numbers. In fact, this game of large numbers is called probabilities. It is a given that traders would have some wins and some losses. However, a winning trader would always come out on top because probabilities would dictate that as long as he or she has enough number of trades, he would be profitable.
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So, how do we skew the game of probabilities in our favor? Different traders have different ways to become consistently profitable. However, one of the best ways to increase our chances is by looking for confluences.
Confluences are basically a convergence of indications pointing out that price is moving in a certain direction. These indications may come from different sources and may have different probabilities. It may come from a price action perspective. It may also be a result of a price pattern setup. It could also be an indication coming from a technical indicator. However, when these indications converge at the same time, the chances of price moving in the indicated direction increases.
In this strategy, we will be looking at confluences coming from three technical indicators that work complementary to each other.
MACD Cross
MACD Cross is a custom technical indicator which is based on the popular oscillator, Moving Average Convergence and Divergence (MACD).
The classic MACD is computes for the difference or divergence between two underlying moving average lines. This is then plotted as an oscillator with a midline at zero. This line is called the MACD line. Then, a signal line is derived from the main MACD line. This is basically a moving average of the main MACD line. The classic MACD identifies trend direction based on how the two lines overlap. The trend is bullish if the MACD line is above the signal line and bearish if it overlaps inversely. Consequently, trend reversals can be identified based on the crossing over of the MACD and signal line.
The MACD Cross indicator is a trend reversal signal indicator based on an underlying modified MACD. It plots a blue dot below price action to indicate a bullish trend reversal and a red dot above price action to indicate a bearish trend reversal.
MACD Signals
MACD Signals or My MACD is another custom technical indicator based on the classic MACD. It is basically a modified version of the MACD which simplifies the process of identifying trend direction.
It basically plots bars based on the difference between the main MACD line and the signal line. Positive bars indicate a bullish trend bias, while negative bars indicate a bearish trend bias.
Consequently, the shifting of the bars from negative to positive or vice versa can be used as a trend reversal signal.
The indicator can also be used as a trend direction filter. Traders may avoid trading against the trend in a short-term trade by avoiding trading against the direction of the trend as indicated by the histogram bars.
DeMarker Indicator
The DeMarker indicator is a technical indicator which is a part of the oscillator family of technical indicator.
It functions by comparing the most recent maximum and minimum price movements to historical price data coming from prior periods in order to identify the supply or demand of a tradeable asset or forex pair. This comparison then leads to indications of the directional bias of the market.
The DeMarker indicator plots an oscillating lien which oscillates within the range of 0 to 1. It also has a marker at level 0.3, 0.5 and 0.7.
The level 0.5 is basically the midline of the range. A line above it indicates a bullish trend bias, while a line below it indicates a bearish bias. Traders may use the crosses over 0.5 as an indication of a probable trend reversal.
The area between 0.3 and 0.7 is the normal range of the oscillator. A line that breaches above 0.7 indicates an overbought market, while a line below 0.3 indicate an oversold market. Both conditions are prime for a price reversal. Traders may use the reversals from such overbought or oversold conditions as a good mean reversal signal.
Trading Strategy
DeMarker MACD Trend Confluence Forex Trading Strategy is a simple trading strategy which is based on the confluence of the three trend following oscillator-based technical indicators.
The My MACD signals are basically based on the shifting of the histogram bars from positive to negative or vice versa. These shifts indicate a potential trend reversal.
The DeMarker oscillator signals act as a confirmation of the trend reversal based on the crossing of the line over its midline, which is 0.5
These signals should then be confirmed based on the MACD cross indicator plotting the dots indicating a trend reversal.
A confluence of these three signals confirm a trend reversal setup.
Indicators:
- MACD_Cross
- Fast EMA Signal: 20
- Slow EMA Signal: 70
- Signal Period: 36
- MACD Signals
- DeMarker
Preferred Time Frames: 30-minute, 1-hour, 4-hour and daily charts
Currency Pairs: FX majors, minors and crosses
Trading Sessions: Tokyo, London and New York sessions
Buy Trade Setup
Entry
- The My MACD indicator bars should shift above zero.
- The DeMarker line should cross above 0.5.
- The MACD Cross indicator should plot a blue dot below price action.
- Enter a buy order on the confirmation of these conditions.
Stop Loss
- Set the stop loss on the support below the entry candle.
Exit
- Close the trade as soon as the MACD Cross indicator plots a red dot above price action.
Sell Trade Setup
Entry
- The My MACD indicator bars should shift below zero.
- The DeMarker line should cross below 0.5.
- The MACD Cross indicator should plot a red dot above price action.
- Enter a sell order on the confirmation of these conditions.
Stop Loss
- Set the stop loss on the resistance above the entry candle.
Exit
- Close the trade as soon as the MACD Cross indicator plots a blue dot below price action.
Conclusion
This trading strategy is a basic trend reversal strategy which is based on a confluence of trend reversal indications.
These indicators work well as supplementary indicators. Confluences coming from these three indicators have a good probability of indicating a trend reversal setup.
This strategy works well in markets where trend reversals produce good swings as it allows traders to profit well from such market moves.
Forex Trading Strategies Installation Instructions
DeMarker MACD Trend Confluence Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.
The essence of this forex strategy is to transform the accumulated history data and trading signals.
DeMarker MACD Trend Confluence Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust this strategy accordingly.
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How to install DeMarker MACD Trend Confluence Forex Trading Strategy?
- Download DeMarker MACD Trend Confluence Forex Trading Strategy.zip
- *Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
- Copy tpl file (Template) to your Metatrader Directory / templates /
- Start or restart your Metatrader Client
- Select Chart and Timeframe where you want to test your forex strategy
- Right click on your trading chart and hover on “Template”
- Move right to select DeMarker MACD Trend Confluence Forex Trading Strategy
- You will see DeMarker MACD Trend Confluence Forex Trading Strategy is available on your Chart
*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.
Click here below to download:
