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Playing with MACD indicator.

Posted in: Investment by Jaromír Adámek on August 29, 2008. Post tags: , , , ,

I experimented with MACD indicator to find some semi-automatic (which will put out my psyche from the game) trade system. MACD is very powerful indicator especially the divergences between the MACD and price is very strong signal to buy or sell.

This was my last experiment with standard MACD (12,26,9) (numbers are the days). I tried double the standard MACD to 24,52,18 . With this values MACD react slower. Standard MACD indicate new up-trend after 4 days and doubled MACD after the 10 days :

MACD standard and doubled

So I will not catch the start of trend, but the doubled MACD filter simple all false indications of new "trends" (next picture). In the MACD 12,26,9 the yellow line cross the orange line (buy signal) too often, which will cost me broker fee and spread "fee". I’m trying build some system, which will trade only few times per year, and will catch the biggest trends. Problem Is, when the market not trending (then the MACD generating tons of false signals and only some human may stop this madness). Last green indicator on next picture is MFI Money Flow Indicator . MFI is very useful too to buy oversold stocks (when it fall under 20) :

MACD 12,26,9 MACD 24,52,18 MFI 14

Clic on this picture to enlarge it.

I tried "half" MACD (6,13,4) too, it was crazy :) . This half MACD take no profit in back-test and trade too often .

Now I’m experimenting with something between standard and doubled MACD, it is MACD 18, 38, 13 (1.5* standard). It looking good .

Ironic is, that what working best is the trendline :) . It’s the red line on first picture in the up-trend, which I drew under the price. When the price cross down this line, it’s time to sell :) . Trading with trendlines is the best one, but it need a lot!!! of experiences (it’s my future project :) )…


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