I have been using a similar method to trader28 for a few years now but my method has a few more indicators but is still relatively simple. I use 2 other indicators other than the MACD and the MA's and use correlation between all of them to avoid whipsaw. IE (all neg or all pos) I use it mostly with us equities intraday on 5 min charts. If anyone is interested I can post the settings and indicators and a couple of screen shots. Ive found that my method avoids most whipsaw and whenever its wrong the pain is not too bad. Usually 3-5 cents per share. Not sure if this would be helpful to you futures guys.
Mirager I am interested in your methodology to see how you can avoid whipsaw. Please post details and screenshots.
Do you guys notice that the zero line cross of the fast line gets you in on the bigger moves and the length of the trade can be extended from 10 minutes to a longer hold? or will the ER destroy you? Michael B.
In my observation and use of this method over the past several weeks, the best way to utilize it is to look for a near term support/resistance level to be established (i.e. same price level hit on several prior bars and bounce back) as the MACD approaches the 0 line or approaches the MACD MA for a crossover. This builds up some pressure. Then use a buy/sell stop for entry when that relevant support/resistance level is broken by 2-3 ticks, which invariably carries enough momentum to create the MACD trigger that Trader28 describes on this thread. This will allow you to get in on the beginning of the move, whereas waiting for the MACD crossover often brings you in a bit late. Also, this method will help prevent you from getting whipsawed when price is just trading back and forth in a range (i.e. MACD crossover triggers occurring but no breakouts to bring momentum with them). Occasionally, there'll be a failed breakout (which invariably is a terrific opportunity to reverse for a good trade), but in most cases this breaking of resistance/support combined with the MACD crossover creates great entries on breakouts which will have sustainable momentum. Hope that helps. Sandy
Ok here is my version of the system that I have been trading for about 2 years to mostly scalp US Equities. Not sure if it would pertain to Futures or other instruments as well. Only thing is I use area charts instead of candles. I will post with area shots but I can switch it to candles, I just find there is less distraction with area charts but its a personal choice. Instrument US Equities 5 min 2 day charts. Indicators. 3 EMA's (9,18,36) I have used them for years and just like the triple cross method, you probably can get away with just using 2 and they can be MA's but I like the smooth waves that EMA's produce. CMF (21) Shows you if the instrument being traded is under accumulation or being sold off. You can tweak with the length to make it longer or shorter to be less correlated or more correlated to the price. Im used to 21 so thats what I use. Full Stochastic (20, 8, 8) Good additional indicator of momentum and displaying OB or OS zones. Again you can set different lengths for K and D to make it more or less sensitive to new data. MACD (12 26 9) No introductions needed The rules. 1. Trade same position size never increase or decrease based on your feelings of where its going. I stick with 500 for my current account size. 2. Exit and stop loss. In the following order every time. A) If position has not moved in any direction or only .02 in either direction in 10-15 min exit. B) I never let the position go more than .10 against me. Mental exit when that hits. (Most of the equities I trade have even spreads and no wild swings so this rarely occurs) C) If A and B are not met then exit when one of the following occurs. (2 MACD lines begin to merge, Stochastic closes in OB or OS territory, CMF diverges from price action (price going up for 3 per and CMF is moving down and vice versa) I know thats kind of alot of stuff but those are just the rules that work best for me. A more simple model would be to stay in the trade 10-15 min and then exit no matter what. 85% of time this results in a .06-.14 move in your favor. 10% of time it is a .03-.06 move against you, 5% its a flat trade -commission. 3. Entry signals. A) MACD cross above below 0 line is the core, secondary MACD crosses of itself while in + or - territory as long as they are with the general trend (MACD crosses below itself while in - territory or above itself in + territory) B) I always avoid MACD signals if it occurs on a large spike up or down in price. (Stock trades in a .05 range all day then has a .10 or .15 gap down. It is easy to spot on area charts because it looks like a cliff. I wait for secondary action when this occurs. C) If the close of this spike is also above or below the 3 EMA's I definitely say out. (Price was above the 3 ema's then gaps down big on the open but the 3 EMA's dont budge and stay above each other, good example of this on the QQQQ chart below Friday morning) D) Stochastic cant be in OS or OB zone (above 85 and below 15 for me) when 0 line cross or MACD cross of itself occurs) E) CMF direction must support the move. It should be - when - MACD line cross and + when +MACD line cross occurs. I will ignore CMF only in 1 situation. The other indicators agree with the move and the CMF is within .10 of its 0 line and trending down. I will enter the trade like normal but if CMF does not follow price I will exit after 10 min.) That is the whole system. I know its allot of info and seems complicated but thats what works for me. The core is the MACD cross and the other indicators supporting that cross. Here is a chart of QQQQ for 10/5 and 10/6 Green arrows show entry Red show exit. The first signal on 10/6 I did not trade because of the spike but just to prove a point an entry there would have been at .47 and exit 10-15 min later with no move in my direction would have been at .43-.44 depending on your fill so a .03 to a .04 loss. Other two sig that day were great.
It is not so much the actual system as it is to have a written set of rules and methodology that one sticks with. That was a good post Miragers. If just to show the plan laid out. Make 'em pretty, Chris
Thanks, you have to have a written set of rules or you cant make it as a traded. I have them typed out and up on one of my screens. I go over them every day before I trade and then check them off in my head before and during a trade.
Has anyone been using this with the ES? It looks like you can make several .5-1.0 scalps a day with the 2 min. This is just trading the MACD crossovers ignoring the zero line rule. If you follow the zero line rule targets can be slightly larger. With the 10-min there seems to be 1-2 larger 2-5 point trades during the day. I suggest following the zero line rule on the 10-min though. Following all of the rules, the 10-min chart seems to be pretty reliable/profitable Anyone else trying it with the ES?
works like a charm on the es. combine it with marketdelta 2min footprint and you have a winner. zero lines dont always kick in but at least you have the opportunity to walk away with a one tick or small loss. but liek you said, it's pretty good just tradig the crossovers.