Forex Strategy -How Successful The MACD Indicator

Regardless of your Forex strategy, have you ever entered trades and shortly afterwards wished you hadn't? The information that follows will hopefully cut down greatly on the number of trades that cause you anxiety!

The MACD (Moving Average Convergence Divergence) indicator can add a degree of certainty to your Forex strategy.

As with any indicator, it is too risky to enter trades on this signal alone. However, as we will see, used with caution on higher time frames, it can help confirm you are going in the right direction and that your trade is higher probability.
Taking MACD Apart
Let's take MACD apart and describe it's component parts.
The default MACD on most charting packages sets 2 EMA's (Exponential Moving Averages) at 26 and 12 days.
This is represented by a colored line (color varies according to charting package) which crosses a different colored 9 EMA often termed the trigger line.
When MACD (the 12/26 EMA) crosses above the trigger line (9 EMA) upward momentum is indicated and vice versa.
A center line, or zero line, often called the water line is also shown in the MACD indicator. When MACD is above the water line an upward trend is indicated, when it is below the water line, a downward trend is indicated.
MACD also includes a histogram, small vertical lines that appear above or below the zero line, not unlike mountains and valleys in appearance.
MACD is a lagging indicator which follows price action.
The histogram is an indicator of MACD. So watching the histogram can give you an early indication of where MACD is going. The height of the histogram can be a good momentum indicator.
Using MACD As A Safety Indicator
How can you use MACD to your advantage?
If you want to be very cautious in your Forex strategy, going only for high probability trades, then pay attention to MACD on the 4 hour and 1 hour charts.
Some traders will only enter a trade when the 4 hour and 1 hour MACD's are going in the same direction. This will mean a lot less trades but the ones you do take are likely to be profitable. (Agreement of the two MACD's is used in conjunction with other indicators, not by itself.)
MACD on the 1 hour chart is particularly powerful. If you want to stay out of trouble and avoid trades you might later regret, NEVER trade against the direction of the 1 hour MACD. To do otherwise is not necessarily foolhardy if you know what you are doing.

But for the newer, less experienced trader, only trading long when MACD has crossed up, or short when MACD has crossed down on the hourly chart when your other favorite indicators line up, will make for a higher success rate with your Forex strategy. It will also save you much anxiety and heartache!

How to Find a Good MetaTrader EA

One of the biggest problems with finding a good MetaTrader Expert Advisor is simply how many there are out there. There are literally hundreds upon hundreds scattered across the internet, either for free on forums and specialized sharing websites, or for sale on individual websites. Now you may intuitively think that you shouldn't even consider the ones that are for sale because there are so many out there that you can get for free! But that is not the case at all. First off you must realize that 99% of the bots you can get for free are going to severely damage your account. At least they won't make you any money. The main reason for this is probably that 99% of mechanical trading systems don't work and the Expert Advisors that are based on them won't work either! Another BIG reason is that most of the bots that are shared for free are created by amateurs that don't really know correct programming let alone how to trade profitably. Often these will be "experimental projects" that may show extraordinary results in back testing and then extraordinarily bad results in live trading. (And why would anyone give away a truly great creation? Reality is that it's probably never going to happen). There are just so many aspects that need to be considered when creating automated algorithmic trading systems, that you can't expect someone without extensive knowledge of the subject matter to be able to do it successfully. There are so many pitfalls for trading system developers to fall into that it's virtually guaranteed that someone without the knowledge and experience will fall into one of those. I'm not going to talk about what these pitfalls are here as that would take too long, but this brings us to the next point I want to make.
I 100% recommend that you buy your Expert Advisor/s. What I've discussed so far should make it clear that it's virtually impossible to find a good enough bot just scouring the internet. But buying one is also easier said than done. Here we actually encounter another big obstacle to finding profitable bots; SCAMMERS. Yes, the rumors are true, the Forex world is filled with shameless scammers praying on innocent people that don't know how to sort the good from the bad. The world of Expert Advisors in no exception. This is very saddening for those of us who "are in the know" and are able to make a living trading Forex. It's saddening when someone asks you what you do for a living and the response you get is something like; "isn't Forex some kind of a scam?". Of course not! But when you type Forex related terms into the search engines scams are often what you'll find. I estimate that about 60% of the bots for sale on the internet are direct scams; they don't work or aren't safe and the vendor knows it and yet claims otherwise. (Don't be fooled by the "incredible returns" the vendor boasts of. All of them do!). I estimate that about 35% are just poor creations by aspiring traders that may not intend to "trick" people, but just don't know and can't do any better. So that leaves about 5% that can actually make you money over an extended period of time. But out of those 5% I would personally probably only use about 1%. Those are the "moneybots". They have been created by a proficient programmer and are based on a solid, robust trading system. So far I have only been able to find a handful that have met my requirements, but they are also fantastic investments! I have been able to find a couple of truly ingenius ones, that have made me substantial amounts of money and as of the writing of this article, I'm currently using with great success.
So how do you find the "moneybots"? First of, don't try to just manually look through the search engine search results because it will be virtually impossible for you to find what you are looking for. Fortunately there are a couple of websites that conduct forward tests of commercial Expert Advisors, and there you can often find actual proof of ones that work. But be careful, many of these websites aren't honest reviewers and many may even be owned by the creators themsleves. But this is still your best option, if you don't know someone who has used a certain EA and can attest to its' virtue.

To make your life a little easier I'm sharing the Expert Advisors that I'm currently using on Income Forex Robots website. I'm not affiliated with any of these, but they are the best I've found so far. Feel free to check them out!

Simple Scalping Strategy

In this article, you will discover a simple scalping strategy that enables you to take small profits out of the Forex market. We will discuss the setup, entry, stop loss and exit stadium. This strategy applies to the major currency pairs EUR/USD, GPB/USD, USD/JPY and EUR/JPY. It works with the daily, hourly and 5 minute candle charts.

Preparation: draw support and resistance lines
First of all, you will make sure that your charts are ready to use for technical analysis. This means that you remove the support and resistance lines of the previous day, so that you have a clear workspace to work on.
Then you make sure, that the last 50 candlesticks are visible on your chart, and you look for the last and second last significant height. Draw horizontal support lines on these points. You can choose any color you want, but make sure that the colors are the same each day. Afterwards, you do the same for the resistance lines. You search for the last and second last significant low, and you draw horizontal resistance lines.
Do the same for each chart and each time frame.
Step 1: Check the setup condition
The setup conditions are as follows:

• The trends of the 3 timeframes must be the same.
• The market has to be trending. Whipsaw patterns are difficult to trade for inexperienced traders.
• On the 5 minutes chart, there has to be enough room to place a trade. This means that the entry point should be at least 20 pips away from the resistance line for a long position, or the support line for a short position.

When these three conditions are met, you can consider placing a trade. Please remember always that this not necessarily means that you will trade.
Step 2: Enter at the right moment.
When a second consecutive bar confirms the trend an it reaches the height of that bar, you can enter the trade on the condition that there is still room for at least 15 pips.
Fifteen pips are based on a target of a ten pips profit, and it takes a spread of 5 pips into account. This is the average spread that applies on a micro or mini account.
Step 3: Place the stop loss
The strategy advises a stop loss of 30 pips below the entry point. If it seems that you can get more than 10 pips out of the trade, you can trail the stop los to break even, to make a 20 or 30 pips profit. This only applies when there is enough room in a trending market.
Step 4: Exit the trade
You have two possibilities. Or you can exit the trade manually, or you can place an exit order. When you close manually, you have the freedom to get more out one trade, but you have to watch it all the time.
An automatic exit order should be placed 15 pips above the entry point for a long position, and 15 pips below the entry point for a short position.
A piece of advice
Since everybody has his own trading style and habits, I strongly recommend you to test drive this strategy on a demo account, so that you fully understand it, before you put money at risk. Secondly, it enables you to customize and fine tune the strategy to your own convenience.
Please note that this strategy is one of the possible approaches to Forex and that we decline any responsibly for your personal trading success or failure. Forex involves the risk of losing money and is not suitable for everybody.

"Go with the trend" and may trading success be with you!