PRICE ACTION MACD STRATEGY -- LEARN TO EARN

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READ CAREFULLY TO LEARN AND EARN

Strategy backtested below for two years from 12/2/2014 to 12/2/2016

Rules:

Only Long tardes when 55 EMA is above 200 EMA
Only short trades when 55<200 EMA

Time Frame 1H

Long Entry Preconditions:

Price above 55 EMA
Positive Divergence seen on MACD signal line (for High probability Entries)
MACD histogram above zero line

Long Entry Trigger:

Price break above Significant peak fractal of previous downwave OR the break above prior peak fractal high.

Exit Strategy or Stop:

Type 1 Exit

Precondition: Negative Divergence seen on MACD signal line; and
Trigger: Break below a consolidation level or the prior minor swing low

Type 2 Exit

Hourly close below 55 EMA

Exit type I or type II whichever comes earlier

# If trade exited but price shoots back piercing out of 55 EMA or is already above 55 EMA, a break of previous peak fractal with MACD histogram above zero line triggers entry again.
# Exit Strategy discussed above works well in long trades but chops in short trades. Tweaking a little by taking 1:1 or smaller targets instead of the Exit strategy may help in this issue.

Back Testing

12/2/2014 to 12/2/2016

1) E=6283 Ex=6487 +204
2) E=6575 Ex=6723 +148
3) E=6725 S=6743 +18
4) E=6749 Ex=6808 +59
5) E=6741 Ex=7269 +528
6) E=7345 Ex=7589 +244
7) E=7572 S=7530 -42
8) E=7548 Ex=7740 +192
9) E=7734 Ex=7770 +36
10) E=7709 Ex=8056 +347
11) E=8051 Ex=8064 +13
12) E=7815 Ex=7759* +56
13) E=7928 Ex= 8364 +436
14) E=8455 Ex=8521 +66
15) E=8152 Ex=7995* +157
16) E=8206 S=8270* -64
17) E=8148 S=8281* -133
18) E=8531 Ex=8861 +330
19) E=8681 Ex=8791 +110
20) E=8840 Ex=8862 +22
21) E=9612 Ex=8413* +1199
22) E=8808 S=8732 -76
23) E=8284 S=8311* -27
24) E=8270 Ex=8066* +204
25) E=8421 S=8390 -31
26) E=8428 Ex=8557 +129
27) E=8461 Ex=8549 +88
28) E=8322 Ex=7559* +763
29) E=8180 Ex=8210 +30
30) E=7988 Ex=7784* +204
31) E=7812 Ex=7682* +130
32) E=7945 S=7905 -40
33) E=7556 Ex=7403* +153
34) E=7402 S=7463* -61
35) E=7255 Ex=6884 +371

#Trades with asterisk mark (*) at the end are short trades.

Winning Trades= 27
Profit= 6237 points

Losing Trades= 8
Loss=474 points

Net points= 5763
Profit with one lot= Rs4,32,225

I have also tested this strategy for current year but I ll update the results later as its very time consuming.
It has been observed that the strategy keeps us in a trade as long as trend is strong. The losses made in the strategy are quite manageable due to price action and divergence combination.
Maximum loss made in a trade was 133 points and maximum profit was 1199 points.

I ll further test this strategy; and the comments of fellow traders can surely help in fine tuning.
I have noticed some fellows make carbon copies of already published ideas :) Its a highly undesirable practice and should be avoided by all means. B'coz readers can differentiate between the original idea and the copied one. Hope I made my point.

Trade safe and stay healthy.
Do hit like and comment.

Best Regards
Bravetotrade

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Correction: the third trade was losing so it's total 26 winning and 9 losing trades.
On profit front it just takes away 18 points, which is not significant.

E =entry
Ex=exit
S=stopped
Started entries r short trades
Others long.

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What makes every good strategy the best is that the profit potential should be higher than the risk involved.
As you can notice that I never had targets and stops decided before the entries. But the highly sophisticated Exit strategy handles the trades quite well and always manages our rewards to risks potential. So besides the Entry technique, it is the Exit technique which makes the overall strategy a better one.

Another point worth mentioning here is that, the strategy gave only 35 trades in two years of back testing. By no means I had imagined that a strategy can yield huge positive results in such a small number of trades, until I saw the results.

The most difficult part in testing and applying a strategy is to trade it with a single lot. This strategy passed that test too.

I have observed that trading with more than one lot can give extraordinary results because then we can sell some lots at some strong resistance level or an important fib extension level. One or more lots can be kept until the Exit strategy takes me out.

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One point that I forgot to mention is that the positive macd divergence precondition for long trade may be fulfilled near reversal zones only. And that could give high probability trade. The subsequent fractal break trades may not fullfil this precondition, but the entries would still remain valid for those trades provided remaining all conditions are fulfilled.

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Back Testing
9/2016 to 9/2017

1)E=8683 Ex=8896 +213
2)E=8663 Ex=8553* (support) +110
3)E=8548 Ex=8476* (1:1 as support was very near to entry) +72
4)E=8093 Ex=7984*(Type 1) +109
5)E=8154 S=8210* (Type 2) -56
6)E=8121 Ex=8075*(1:1 and near support) +46
7)E=8062 Ex=7960* (near strong support) +102
8)E=7942 S=7957* (type 1) -15
9)E=8338 Ex=8354 +16
10)E=8460 Ex=8739 +279
11)E=8827 Ex=8905 +78
12)E=8982 s=8889 -93
13)E=9141 s=9147 -6
14)E=9132 Ex=9176 (Div) +44
15)E=9184 Ex=9323 (Div) +139
16)E=9377 Ex=9455 +78
17)E=9436 Ex=9638 +202
18)E=9623 s=9612 -11
19)E=9676 s=9624 -52
20)E=9576 Ex=9845 (Div) +269
21)E=9923 Ex=10065 +142
22)E=9783 s=9854 -71
23)E=9985 Ex=10063 +78
24)E=10159 s=10129 -30

Total trades=24
Winning trades=16
Losing trades=8

Profit=1977 points
Loss=334 points
Net Profit=1643 points =Rs. 123225 per lot

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October Trades :
1) E=9903 Ex=10002
2) E=10068 Ex/S=??

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Trailing stop for this trade: 10212

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E=10068 Ex=10208

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3) E=10278 SL=10240

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TSL=10270

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TSL=10325

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3) E=10278 Ex=10325

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Total trades =3
Winning trades =3

October Profit =99+140+47=286 points

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Backtest 10/2017 to 2/2018:
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1. 9959/10000=+41
2. 10068/10210= +142
3. 10245/10412= +167
4. 10330/10185- +145*
5. 10344/10307= -37
6. 10375/10355= -20
7. 10211/10096= +115*
8. 10148/10280= +132
9. 10231/10140= -91
10. 10374/10477= +103
11. 10409/10496= -87*
12. 10504/11009= +505
13. 10878/10425= +453*
14. 10456/10350= +106*
15. 10430 Active
Trades with star are short trades
Total profit points of 5 months= 1674

I backtested by eliminating 200EMA (slight modification).

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Trade 15 closed today at 10460. This March months back testing will be published on May end.
I ll try to make a newer post coz there have been some changes in the rules. Hope it ll be helpful.