MACD Stochastic Forex Trading Strategy

The MACD Stochastic Forex Trading Strategy is a trading system based on two MT4 indicators:

  • the MACD
  • and the stochastic

The MACD indicator in this strategy is used as a filter to avoid the false trading signals whilst the stochastic oscillator indicator is generates the buy and the sell signal.

Currency Pairs: Any

Timeframes: Preferably the 1hr and upwards

Refer to the the following chart for the rules of the MACD Stochastick Forex Trading Strategy for which I’m going to explain below:

MACD Stochastic Forex Trading Strategy

 

Buying Rules

  1. MACD must be above the 0.0 level and this indicates an uptrend.
  2. stochastic indicator must have a cross over at oversold region which is around the level 20 line as shown on the chart above.
  3. On the high of the candlestick that corresponds the two lines of stochastic crossing over, place a buy stop order a minimum of 2 pips above its high.
  4. Place your stop loss at least 2-5 pips below the low of that candlestick but if you see that it is going to be too close to the entry price, then look for the nearest swing low and place it 2 pips below its low.
  5. Aim for a risk:reward of 1:2 or above for your take profit target. Another option is to use the previous swing high as your take profit target level.

SellingĀ Rules

  1. MACD must be below the 0.0 level, this indicates a downtrend.
  2. stochastic indicator must have a cross over at overbought region which is around the level 80 line as shown on the chart above.
  3. On the low of the candlestick that corresponds the two lines of stochastic crossing over, place a sell stop order a minimum of 2 pips below its low.
  4. Place your stop loss at least 2-5 pips above the high of that candlestick but if you see that it is going to be too close to the entry price, then look for the nearest swing high and place it 2 pips above it.
  5. Aim for a risk:reward of 1:2 or above for your take profit target. Another option is to use the previous swing low as your take profit target level.
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