Trading strategy: MACD triple

Description of the MACD Triple strategy

The MACD Triple strategy is a strategy with multiple time frames. Such strategies are based on one or more technical indicators that are analysed in parallel in different but related time frames. The higher time frames serve as trend filters and the smaller time frames serve as signals.

The trading strategy in detail

The MACD Triple strategy bases itself on the moving average convergence divergence indicator (MACD - 12,26,9). The MACD is analyzed in three time frames: 4 hours, 1 hour and 15 minutes. Notice that the ratio of each time frame to the next is 4:1. The 1-hour and 4-hour MACDs serve as trend filters. The 15-minute MACD gives the buy and short sell signals.

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When to open a position?

The 15-minute MACD gives a buy signal when the fast MACD leg crosses the slow MACD leg upwards. The 15-minute MACD chart gives a short sell signal when the fast MACD leg crosses the slow MACD leg downwards.

The trend filter

Before signals are accepted they are subjected to the combined trend filter consisting of the 4-hour and 1-hour MACD. If both are bullish, only buy signals are accepted. If both are bearish only short sell signals are accepted. If one is bullish and the other is bearish, all signals are rejected.

The time filter

The strategy also incorporates a time filter. The time filter accepts signals from 08h00 to 21h20. Signals outside this time period are rejected by the platform.

When to close a position?

The DAX-ORB strategy includes a price target order and a stop loss order. The stop loss order is placed on the opposite side of the opening range channel. The price target is 2x the risk of the stop loss. NanoTrader places these orders automatically.

What to do when both the price target and the stop loss orders are not reached during the day? The DAX-ORB strategy solves this with a time filter. The filter automatically closes the position at the market price at 21h45. The trader has no position overnight, and is for a new signal the next morning.

This example shows a day with two buy signals. Below the main chart are the three MACDs. The green background in the chart indicates that both the 1-hour and 4-hour MACDs are bullish. Only buy signals will be accepted. The fast leg of the 15-minute MACD crosses the slow leg upwards generating a buy signal. The stop (red line) and profit target (green line) appear automatically when the position is opened. In both cases the open position is closed with a profit when the 15-minute MACD crosses back in the opposite direction.

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This example shows a short sell signal. Below the main chart are the three MACDs. The red background in the chart indicates that both the 1-hour and 4-hour MACDs are bearish. Only short sell signals will be accepted. The fast leg of the 15-minute MACD crosses the slow leg downwards generating a short sell signal. The stop (red line) and profit target (green line) appear automatically when the position is opened. The market price nearly reaches the profit target around 14h00. The open position is closed a bit later when the 15-minute MACD crosses back in the opposite direction.

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This example shows a day with two short sell signals. Below the main chart are the three MACDs. The red background in the chart indicates that both the 1-hour and 4-hour MACDs are bearish. Only short sell signals will be accepted. The fast leg of the 15-minute MACD crosses the slow leg downwards generating a short sell signal. The stop (red line) and profit target (green line) appear automatically when the position is opened. In both cases the open position is closed when the 15-minute MACD crosses back in the opposite direction.

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Is this trading strategy profitable?

The results of the MACD Triple strategy vary. These screenshots show back-tests over a 7-year horizon for a number of market indices and commodities. The strategy can be applied to all instruments so you can back-test and optimize whatever you are interested in.

Conclusion

The MACD Triple strategy is a typical multiple time frames strategy. Combining multiple time frames usually seems to yield good results in trading. Traders should look into such strategies. The MACD Triple strategy can be used for market indices, stocks, forex and commodities. The strategy is a day trading strategy but days without signals are not uncommon.

Practical implementation

In NanoTrader follow these steps:

1. Open the chart of the instrument you want to trade.

2. In the WHS Strategies folder, select the "WHS MACD Triple" strategy.

3. Semi-automated trading? Activate TradeGuard+AutoOrder. Automated trading? Activate AutoOrder.

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