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MACD Retrace Forex Trading Strategy

Amandeep Sonewane | Jul. 11, 2019
MACD Retrace Forex Trading Strategy

You can now download the MACD Retrace Forex Trading Strategy for free on AtoZ Markets indicators gallery.

This strategy will be built around re-entering the market as the retracements or contractions end as confirmed by the MACD histogram and signal line.

First, we will have our trend direction filters. These will be our 14-period and 50-period Exponential Moving Average (EMA). The basis of the trend is on how these two moving averages are stacked, having the faster EMA above the 50 EMA on an uptrend, and vice versa.

We will also use the MACD as a confirmation of the trend direction by using its midline. If both the MACD Histogram and MACD Signal Line are above zero, then our bullish direction is confirmed, and vice versa.

Our entries will be based on the crossovers of the MACD histogram and signal line. During an uptrend, the histogram is usually above the signal line. We then wait for the retracement or contraction as confirmed by the histogram going slightly below the signal line. Then finally, we enter the market as the histogram crosses above the signal line, confirming the end of the retracement.

The opposite strategy applies for our sell trades.

Indicators:

  • 14 EMA: Green
  • 50 EMA: Brown
  • MACD: default parameters

Currency Pairs: any

Timeframe: any

Trading Session: any

How to trade with MACD Retrace Forex Trading Strategy?

Buy (Long) Trade Setup Rules

Entry

  • The 14 EMA should be above the 50 EMA
  • MACD Histogram and Signal Line should be above zero
  • Retracement: wait for the MACD Histogram to cross below the Signal Line
  • Enter a buy market order as the MACD Histogram crosses back above the Signal Line

Stop Loss

  • Set the stop loss at the lowest low among the previous three candles and the entry candle

Take Profit

  • Set the target take profit at 2x the risk

Sell (Short) Trade Setup Rules

Entry

  • The 14 EMA should be below the 50 EMA
  • MACD Histogram and Signal Line should be below zero
  • Retracement: wait for the MACD Histogram to cross above the Signal Line
  • Enter a buy market order as the MACD Histogram crosses back below the Signal Line

Stop Loss

  • Set the stop loss at the highest high among the previous three candles and the entry candle

Take Profit

  • Set the target take profit at 2x the risk

How to download and install an indicator?

In order to install the indicator on your MT4 platform, you need to follow these steps:

  1. Click on “Download Indicator” button located at the top right corner of the screen.
  2. Save the file to your computer.
  3. Extract and move the files into MT4>Indicator folder of the MetaTrader4 software file directory.
  4. Restart your Metatrader platform.
  5. Navigate to “Indicators.”
  6. And select “MACD Retrace Forex Trading Strategy” template to apply it on the chart.

Note: This indicator was developed by T. Morris. AtoZ Markets does not carry any copyrights over this trading tool.

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.