Top 5 MACD Trading Strategies for Olymp Trade.

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What is MACD?

Are you new to trading and are wondering what MACD is?

MACD stands for the Moving Convergence Divergence.

It is one of those trading tools that technical analysis traders use to identify both the direction and the strength of a market trend.

Components of MACD.

MACD is composed of the following:

  • Zero line.
  • Fast-moving average.
  • Slow-moving average.
  • Histogram or Curve.

Components of MACD

Basic Signals Provided by MACD.

Usually, when the market is trending upwards, the MACD moving averages and the histogram or curve shift from below to above the zero line.

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The fast-moving average may also cross over from below to above the slow one.

However, when the market begins to trend downwards, the MACD moving averages and the histogram or curve shift from above to below the zero line.

The fast-moving average may also cross over from above to below the slow one.

Basic Signals Provided by MACD.

MACD Trading Strategies.

The Moving Average Convergence Divergence (MACD) is used to formulate different trading strategies for use while trading in Olymp Trade.

Olymp Trade provides a pool of technical tools traders can combine with the MACD to formulate robust trading strategies.

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A trading strategy is a plan which defines when to enter and exit the market and also spells out the money management technique to be employed.

MACD is an efficient tool that has been used by almost every trader to define entries and exits while trading.

If you have been looking for several MACD-based trading strategies to apply while trading on Olymp Trade, then here are the top 5.

Top 5 MACD Trading Strategies for Olymp Trade.

Now that you understand what MACD is and can actually use it to trade In Olymp Trade, don’t you think you need actual strategies based on the tool?

A trader without a trading strategy is as good as a gambler and so to be sure you are trading profitably using the MACD, we opt to show you the top 5 MACD trading strategies you can employ when trading in Olymp Trade.

Here is my list:

  • MACD-AO Trading Strategy.
  • EMA-MACD Trading Strategy.
  • MACD-CCI Trading Strategy.
  • MACD-MFI Trading Strategy.
  • MACD-RVI Trading Strategy.
  1. MACD-AO Trading Strategy.

The MACD-AO trading strategy is one that incorporates the Moving Average Convergence Divergence (MACD) and the Awesome Oscillator (AO).

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You already know how the MACD looks and works, but what about the Awesome Oscillator?

Awesome Oscillator (AO).

The Awesome Oscillator (AO) is a technical oscillator used to measure market momentum to get trend direction and possible price reversal points.

It does so by calculating the difference between 5 period and 34-period moving averages which are calculated by using the midpoints of price bars.

Components of the AO are:

  • Zero line.
  • Curve, area, or histogram oscillating about the zero line.

When the AO curve, area, or histogram crosses from below to above the zero line, it signifies that the market momentum is upwards.

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However, when the AO curve, area, or histogram shifts from above to below the zero line, it indicates that the market momentum is downwards.

Reversal points are hinted at by the AO in cases where:

  • The market was on an uptrend yet the AO curve shifts from above to below the zero line.
  • The market was on a downtrend yet the AO curve shifts from below to above the zero line.

Components of the AO

The MACD, Awsome Oscillator Strategy.

So how do you combine the MACD and the AO to come up with a robust trading strategy?

Simple, especially now that you know how each tool works in Olymp Trade.

The primary indicator of the strategy is the MACD.

MACD will be the tool we will use to generate trading signals, then confirm such signals with the Awesome Oscillator.

Step 1 – Signal.

So what then?

Observe the MACD and see the kind of signal it gives.

Do you remember how the basic MACD bullish signal looks like? What about the basic MACD bearish signal?

A basic MACD bullish signal will be shown by either:

  • The fast MACD Moving Average crossing over from below to above the slow MACD Moving Average.
  • The MACD Histogram/curve or both MACD Moving Averages shifting from below to above the zero line.

MACD bullish signal

A basic MACD bearish signal will be shown by either:

  • The fast MACD Moving Average crossing over from above to below the slow MACD Moving Average.
  • The MACD Histogram/curve or both MACD Moving Averages shifting from above to below the zero line.

MACD bearish signal

Step 2 – Confirmation.

Done with the MACD?

It is then time to confirm the signal with the Awesome Oscillator just before you enter a position in the direction of the signal.

So how do you confirm the MACD signals using the Awesome Oscillator?

Very simple.

A MACD bullish signal is confirmed by either:

  • The AO curve, area or histogram crossing from below to above the zero line.
  • The AO not showing any signs of a beginning bearish price move, if the first criteria fails.

A MACD bearish signal is confirmed by either:

  • The AO curve, area or histogram crossing from above to below the zero line.
  • The AO not showing any signs of a beginning bullish price move, if the first criteria fails.

Bearish Signal confirmation

Step 3 – Entry.

Enter a buy position following a confirmed bullish signal and a sell position following a confirmed bearish signal.

You might have questions about exit of the position and that is what I am about to address next.

Step 4 – Exit.

Hold the buy position until MACD gives an opposing bearish signal which may or may not be confirmed by the AO.

Also, hold the sell position until MACD gives an opposing bullish signal which may or may not be confirmed by the AO.

  1. EMA-MACD Trading Strategy.

The EMA-MACD trading strategy incorporates the Moving Average Convergence Divergence (MACD) with the Exponential Moving Average (EMA).

We’ve already covered how MACD looks and works.. 

Now let’s discuss how the EMA works.

Exponential Moving Average (EMA).

The Exponential Moving Average is a technical indicator which calculates and shows the average of a given range of prices of an asset over a specified number of periods.

It is different from other moving averages because it places a greater significance on the most recent data in its calculation, making it a more preferable moving average.

When the EMA is sloping upwards and the price is trading above it, then the market is on an uptrend.

However, when the EMA is sloping downwards and the price is trading below it, then the market is on a downtrend.

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The EMA-MACD Strategy.

Wondering how a trader would combine the MACD with EMA to formulate a profitable trading strategy? Well, it is simple,, just as you are about to find out.

The primary indicator here is the Exponential Moving Average (EMA).

To make the best blend, you must adjust the EMA to a period of 50 as you use the MACD in its default settings.

A higher period EMA filters much of the market noise and gives fewer but more accurate signals.

You can then use the EMA to draw signals which you will proceed to confirm with the MACD.

Step 1 – Signal.

We have just mentioned that a bullish market trend will be signified when the EMA is sloping upwards and the price has crossed to trade above it.

On the other hand, a bearish market trend will be signified when the EMA is sloping downwards and the price has crossed to trade below it.

Step 2 – Confirmation.

An EMA bullish signal will be confirmed by either:

  • The fast MACD Moving Average crossing over from below to above the slow MACD Moving Average.
  • The MACD Histogram/curve or both MACD Moving Averages shifting from below to above the zero line.

An EMA bearish signal will be confirmed by either:

  • The fast MACD Moving Average crossing over from above to below the slow MACD Moving Average.
  • The MACD Histogram/curve or both MACD Moving Averages shifting from above to below the zero line.

EMA-MACD Trading Strategy.

 

Step 3 – Entry.

Enter a buy position following a confirmed bullish signal and a sell position following a confirmed bearish signal.

Step 4 – Exit.

Exit the buy position when an opposing bearish EMA signal appears, which may or may not be confirmed by MACD.

Also, exit the sell position when an opposing bullish EMA signal appears, whether or not confirmed by the MACD.

  1. MACD-CCI Trading Strategy.

The MACD-CCI trading strategy blends the Moving Average Convergence Divergence (MACD) with the Commodity Channel Index (CCI).

I’m sure you aren’t wondering how the MACD looks like and works, because you already have enough MACD knowledge from the introduction.

Let us introduce the Commodity Channel Index (CCI) though.

Commodity Channel Index (CCI).

The Commodity Channel Index (CCI) is a technical indicator which compares the current price to the average price over a given number of periods.

This may in turn be used by traders to gauge the market momentum.

CCI components are:

  • Zero line.
  • Curve, area, dots or histogram oscillating about a zero line.

Apart from the zero line, there are other levels above and below the zero line.

Mostly, the CCI curve, area, dots or histogram move between -100 and +100 while sometimes the movement may be beyond such levels. +100 and -100 are therefore usually considered the upper and lower limits of the CCI respectively.

Basically, the cross of the CCI curve, area, dots or histogram from below to above the zero line is an indicator of upward price momentum.

The cross of such parameters from above to below the zero line hints at a downward price momentum.

The MACD-CCI Strategy.

It may look complex how MACD can be combined with CCI to formulate a trading strategy but it isn’t.

The primary indicator here will be MACD.

MACD will therefore be used to draw trading signals which can then be confirmed with the CCI.

It is that simple.

I hope you remember how basic MACD bullish and bearish signals look like.

Step 1 – Signal.

A basic MACD bullish signal will be shown by either:

  • The fast MACD Moving Average crossing over from below to above the slow MACD Moving Average.
  • The MACD Histogram/curve or both MACD Moving Averages shifting from below to above the zero line.

A basic MACD bearish signal will be shown by either:

  • The fast MACD Moving Average crossing over from above to below the slow MACD Moving Average.
  • The MACD Histogram/curve or both MACD Moving Averages shifting from above to below the zero line.

Basic Signals Provided by MACD.

Step 2 – Confirmation.

After you have spotted either signal, the next thing is to confirm the signal using the CCI.

I hope you also remember what the respective crosses of the CCI about the zero line signify.

A MACD bullish signal will be confirmed by either:

  • The CCI curve, area, dots or histogram crossing from below to above the zero line.
  • The CCI curve, area, dots or histogram having read below -100 level and crossed the level from below upwards.

A MACD bearish signal will be confirmed by either:

  • The CCI curve, area, dots or histogram crossing from above to below the zero line.
  • The CCI curve, area, dots or histogram having read above +100 level and crossed the level from above downwards.

The MACD-CCI Strategy.

Step 3 – Entry.

Enter a buy position following a confirmed bullish signal and a sell position after confirming a bearish signal.

Step 4 – Exit.

Hold the buy position until MACD gives an opposing bearish signal which may or may not be confirmed by the CCI.

Hold the sell position until MACD gives an opposing bullish signal which may or may not be confirmed by the CCI as well.

  1. MACD-MFI Trading Strategy.

The MACD-MFI trading strategy combines the use of Moving Average Convergence Divergence (MACD) with the Money Flow Index (MFI).

I know there is no question about what MACD is and how it works.

The only concerns there might be are about Money Flow Index (MFI), which we will address shortly.

Money Flow Index (MFI).

Money Flow Index (MFI) is a technical oscillator which combines both the price and surges in volume to give trading signals.

As such, it does not give so many trading signals as other oscillators would. I

t requires significant price moves backed by significant volume in order to show extreme readings.

Money Flow Index (MFI) presents as a simple continuous line on a window below and separate from the main chart.

The oscillator is used to show overbought and oversold conditions which may act as trigger to sell or buy entries.

For the Money Flow Index (MFI) to show overbought and oversold conditions, it means that it has to show extreme readings.

Oversold conditions portray when the MFI reading is extremely low while overbought conditions portray when the MFI reading is extremely high.

Overbought conditions mean that the market is about to get exhausted and reverse downwards from the upwards price move.

Oversold conditions, on the other hand, mean that the market is about to gain momentum and begin rising from the prior down move.

The MFI indicator is not available on the main Olymp Trade platform but you can ind it on MT4.

To make sense of this strategy try Olymp Trade MT4 platform.

The Strategy.

Having known what the MFI is and how it works, your only worry would then be how to combine it with MACD to form a trading strategy.

Well, it’s also simple to do so.

The primary indicator here will be the Money Flow Index (MFI).

We will use the MFI to generate trading signals which we can then confirm using the MACD.

Step 1 – Signal.

A bullish signal will come up when MFI shows an oversold condition by having an extremely low reading.

A bearish signal, however, will be shown when the MFI is portraying an overbought condition by having an extremely high reading.

Step 2 – Confirmation.

The next thing to do is to confirm the signal you got from MFI using MACD. So how do you confirm such signals using the MACD? Simple as well.

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MFI bullish signal will be confirmed by either:

  • The fast MACD Moving Average crossing over from below to above the slow MACD Moving Average.
  • The MACD Histogram/curve or both MACD Moving Averages shifting from below to above the zero line.

MFI bearish signal will be confirmed by either:

  • The fast MACD Moving Average crossing over from above to below the slow MACD Moving Average.
  • The MACD Histogram/curve or both MACD Moving Averages shifting from above to below the zero line.

Step 3 –Entry.

Enter a buy position following a confirmed bullish signal and a sell position following a confirmed bearish signal.

Step 4 – Exit.

Exit the buy position when an opposing bearish MACD signal appears. Also, exit the sell position when an opposing bullish MACD signal appears. MFI is not appropriate to give you exit signal.

  1. MACD-RVI Trading Strategy.

MACD-RVI trading strategy blends the Moving Average Convergence Divergence (MACD) with Relative Vigor Index (RVI).

It is obvious that you have nothing to ask about MACD, but you must be wondering what the heck this Relative Vigor Index (RVI) really is.

Let us address that first.

Relative Vigor Index (RVI).

Relative Vigor Index (RVI) is simply an oscillator related to the Stochastic Oscillator. Its calculation is based on an asset’s closing price and the price range of such asset.

Basically it is a measure of price momentum just as MACD is.

How does the RVI look like?

It has a fast moving line and a slow moving line, oscillating about a zero line and within a given range.

Do you remember that MACD also has a fast moving line and a slow moving line as well? I hope you do.

Now, when the fast RVI line crosses over from below to above the slow RVI line, the price momentum is bound to be upwards.

On the flip side, when the fast RVI line crosses over from above to below the slow RVI line, the price momentum is downwards.

That’s simply how the RVI works.

To make sense of this strategy try Olymp Trade MT4 platform.

The Strategy.

Do not for a single minute wonder how one would combine MACD and RVI as a trading strategy because I am going to explain how.

It is very simple and you won’t find it anything difficult to grasp.

Here, there is no a primary indicator.

Either of the two, whether MACD or RVI, which gives a signal first becomes the primary indicator.

You can then use the other one to confirm the signal generated by the first.

Step 1 – Signal.

A bullish MACD signal would be shown by either:

  • The fast MACD Moving Average crossing over from below to above the slow MACD Moving Average.
  • The MACD Histogram/curve or both MACD Moving Averages shifting from below to above the zero line.

A bullish RVI signal is shown by the fast RVI line crossing over from below to above the slow RVI line.

A bearish MACD signal would be shown by either:

  • The fast MACD Moving Average crossing over from above to below the slow MACD Moving Average.
  • The MACD Histogram/curve or both MACD Moving Averages shifting from above to below the zero line.

A bearish RVI signal is shown by the fast RVI line crossing from above to below the slow RVI line.

Step 2 – Confirmation.

If you obtained MACD signals, use the corresponding RVI signals to confirm the respective signals.

However, if you obtained RVI signals, use the corresponding MACD signals to confirm the respective signals.

Step 3 – Entry.

Enter a buy position following a confirmed bullish signal and a sell position following a confirmed bearish signal.

Step 4 – Exit.

Exit the buy position once either tool give an opposing bearish signal and the sell position once either tool give an opposing bullish signal.

Wrapping Up.

MACD is a simple technical tool, but very resourceful as far as formulation of trading strategies is concerned.

Above are the top 5 and most effective and most profitable strategies based on MACD.

They are all known to work perfectly in Olymp Trade and so apply them in your Olymp Trade trading today.

Happy Trading!

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