Developer: Gerald Appel. Source: Appel, G. (2005). Technical Analysis. NJ: Pearson Education, Education, Inc; Star, B., PhD (2016). Zero In On The MACD. Stocks & Commodities, May 2016. Concept: Trend following trading strategy based on the MACD (Moving Average Convergence Divergence) line. Research Goal: Performance verification of momentum signals. Trade Trade Setup: Setup : Long Setup: MACD[i − 1] > 0. Short Setup: MACD[i − 1] < 0. Index: i ~ Current Bar. Trade Entry: Long Trade Trade Entry: A buy at the open is placed placed after a long setup. setup. Short Trade Trade Entry: A sell at the open open is placed after after a short setup. Portfolio: 42 futures markets from four major market sectors (commodities, currencies, interest rates, and equity indexes). Data: Since 1980. Testing Platform: MATLAB®.
Exponential Moving Average #1 (EMA#1):
Alpha#1 = 2 / (EMA#1_Look_Back + 1); EMA#1[i] = Alpha#1 × Close[i] + (1 − Alpha#1) × EMA#1[i − 1]; Index: i ~ Current Current Bar. Bar. Exponential Moving Average #2 (EMA#2):
Alpha#2 = 2 / (EMA#2_Look_Back + 1); EMA#2[i] = Alpha#2 × Close[i] + (1 − Alpha#2) × EMA#2[i − 1]; Index: i ~ Current Current Bar. Bar. MACD:
MACD[i] = EMA#1[i] − EMA#2[i] Index: i ~ Current Current Bar. Bar.
Long Trades:
MACD[i-1] > 0 Index: i ~ Current Current Bar. Bar. Short Trades:
MACD[i-1] < 0 Index: i ~ Current Current Bar. Bar.
Entry: Long Trades: Trades: A buy at the open is placed after a bullish bullish Setup. Short Trades: Trades: A sell at the open is placed after a bearish Setup. Stop Loss Exit: ATR(ATR_Length) is the Average True True Range over a period of ATR_Length. ATR_Stop ATR_Stop is a multiple of ATR(A ATR(ATR_Length). TR_Length). Long Trades: Trades: A sell stop is placed at [Entry − ATR(ATR_Length) * ATR_Stop]. Short Trades: A buy stop is placed at [Entry + ATR(ATR_Length) ATR(ATR_Length) * ATR_Stop]. ATR_Stop]. Stop Loss Exit is used to normalize risk via position sizing.
Test Setup: Setu p: https://oxfordstrat.com/trading-strategies/macd-part-1/
Test Setup: Setu p: https://oxfordstrat.com/trading-strategies/macd-part-1/
Test Setup: Setu p: https://oxfordstrat.com/trading-strategies/macd-part-1/
Test Setup: Setu p: https://oxfordstrat.com/trading-strategies/macd-part-1/
Test Setup: Setu p: https://oxfordstrat.com/trading-strategies/macd-part-1/
Test Setup: Setu p: https://oxfordstrat.com/trading-strategies/macd-part-1/
Test Setup: Setu p: https://oxfordstrat.com/trading-strategies/macd-part-1/
Test Setup: Setu p: https://oxfordstrat.com/trading-strategies/macd-part-1/
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A trading strategy strategy based on the MACD line crossing its zero line is an average momentum momentum model. The default parameters parameters for the MACD should be avoided (i.e. EMA#1_Look_Back = 12 and EMA#2_ EMA#2_Loo Look_B k_Back ack = 26). 26).
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