The MACD indicator is one of the most used forex trading indicators out there. However, there's a new version of the same called AK MACD BB and in this video, we will be reviewing a strategy based on this new MACD indicator.
I will also backtest this MACD forex trading strategy 150 times using a risk-to-reward ratio of 1:1.5.
This video is related to Stock Trading, Forex Trading, MACD indicators, Forex, Technical Analysis, Forex Strategies, Strategy Backtesting, Trading Indicators, Scalping Strategies, How to trade forex, and How to use trading indicators.
DISCLAIMER The information presented in this video is for educational and entertainment purposes only and is not financial advice. I am not a financial advisor. Forex and crypto trading is highly speculative and risky. It is only suitable for those people who understand, and are willing to take on, the financial and other risks involved, and who have the resources to withstand losses that may be significantly greater than any deposits you have made.
00:00In this video, I'm gonna show you a simple strategy that utilizes an improved version of the MACD indicator called the AK MACD indicator.
00:09This strategy was discovered by this YouTube channel called SwitchStats.
00:14They claim that it's simple and easy to follow and it also has a pretty high success rate if used correctly.
00:21I'm also gonna be backtesting this particular strategy 150 times using a risk to reward ratio of 1 to 1.5 just to see how it performs in different market conditions.
00:32Well, enough talk. Let's dive straight into it.
00:35First things first, get on TradingView and load whatever forex pair or trading security that you like.
00:41For me, I'm gonna be using the EURUSD on a 5-minute time frame, but this strategy will work on any security and on any time frame.
00:50Now, head over to the Indicators tab and type in AK MACD BB.
00:56Be sure to select this one by Algokade.
00:59Then, we're gonna access this indicator's settings in order to change it up a bit.
01:03Click on the Style tab and uncheck everything except the plot and the zero line and then click OK.
01:12So, this indicator will be our entry confirmation indicator.
01:16Whenever the dots switch from red to green and it happens above the zero line like this, this becomes our long entry signal.
01:25And whenever the dots switch from green to red and it happens below the zero line like here, this becomes our short entry signal.
01:34Now, for the second indicator, head back to the Indicators tab and type in SSL Hybrid.
01:41Be sure to select this one by McCall 00.
01:45Again, we're gonna access this indicator's settings by clicking right here.
01:50Head over to the Style tab and uncheck everything except for the MA Baseline.
01:56After that, head over to the Inputs tab and change the MA Baseline Length from 60 to 30.
02:05After that, change the MA Baseline Type from HMA to EMA and then click OK.
02:14Now, this indicator will be our Trend Identifier.
02:18When the price is above the MA Baseline like this, we're only gonna be looking to take long trades.
02:24And when the price is below the MA Baseline like here, we're only gonna be looking to take short trades.
02:31Pretty self-explanatory.
02:33Last but not least, our third indicator is called Volume.
02:38Be sure to select this one by Trading View.
02:41Again, we're gonna access this indicator's settings by clicking right here.
02:47Head over to the Style tab and click on the Volume MA checkbox.
02:52Then click here and change the color to white just so it's easy to see when reading the charts.
02:59After that, click on the Inputs tab and change the MA Length to 9.
03:05And then click OK.
03:07We will be using this indicator to determine if there is enough volume in the market to push the price up or down.
03:15Whenever the volume bar is above the MA line, we will be looking to take trades since this would indicate that there is enough volume in the market.
03:25But whenever the volume bar is below the MA line, we will not take any trades since this would indicate that there is not enough volume in the market.
03:36Now, let's go over the conditions for entering trades.
03:39To enter a long trade, first, the MA Baseline must be colored in blue and the price must be trading above it.
03:46Second, the price must pull all the way back to the MA Baseline.
03:51During this pullback, the MA Baseline must change color from blue to either gray or red.
03:58If the color doesn't change and it just remains blue, we will have to skip that setup altogether.
04:04The third condition is to wait until the dots of this improved MACD change color from red to green while still being above the zero line.
04:14Lastly, we make sure that the volume bar of the volume indicator is above the moving average.
04:21All these conditions are met on this candle, so we enter a long trade.
04:27We're going to set our stop loss either right below the MA Baseline or below the most recent swing low, whichever of the two that is wider.
04:40For the tech profit, we're going to set it at 1.5 times the risk.
04:46We let this trade run.
04:48And full TP.
04:50Now, here is another example.
04:52As we can see here, the MA Baseline was colored in blue and the price was trading above it.
04:59Price then created a pullback to this MA Baseline and as you can see here, the MA Baseline changed color to gray during this pullback.
05:08Finally, we wait for these dots to change color to green.
05:13And we also make sure that the volume bar is above the moving average.
05:18We enter a long trade here.
05:21Set our stop loss below the most recent swing low, which is this one right here.
05:28And for the tech profit, we're going to set it at 1.5 times the risk.
05:34We let this trade run.
05:36And full TP.
05:38Now, you may be asking yourself, but what are the conditions for entering a short trade?
05:43Well, I'm glad you asked.
05:45To enter a short trade, you basically just have to do the opposite of everything we did for a long trade.
05:52Don't worry.
05:53I'm still going to explain everything.
05:55First, the MA Baseline must be colored in red and the price must be trading below it.
06:02Second, the price must pull all the way back to the MA Baseline.
06:06During this pullback, the MA Baseline must change color from red to either gray or blue.
06:13If the color doesn't change and it just remains red, we will have to skip that setup altogether.
06:20The third condition is to wait until the dots of this improved MACD change color from green to red while still being below the zero line.
06:30Lastly, we make sure that the volume bar of the volume indicator is above the moving average.
06:37All these conditions are met on this candle, so we enter a short trade.
06:43We're going to set our stop loss either right above the MA Baseline or above the most recent swing high, whichever of the two that is higher.
06:54For the tech profit, we're going to set it at 1.5 times the risk.
07:00We let this trade run and full TP.
07:04Now, here is another example.
07:07As we can see here, the MA Baseline was colored in red and the price was trading below it.
07:13Price then created a pullback to this MA Baseline and as you can see here, the MA Baseline changed color to gray during this pullback.
07:23Finally, we wait for these green dots to change color to red and we also make sure that the volume bar is above the moving average.
07:32We enter a short trade here, set our stop loss above the most recent swing high, which is this one right here.
07:42And for the tech profit, we're going to set it at 1.5 times the risk.
07:48We let this trade run and it hits TP.
07:52The most important question now is, how exactly does this strategy perform in different market conditions?
08:00Well, to answer that, I'm going to backtest it 150 times using a risk to reward ratio of 1 to 1.5.
08:08The account size is going to be set at $1,000 and we're going to be risking 2% of that every time we take a trade.
08:17Let's get started.
08:47Let's get started.
09:17After 150 trades, we see that the win rate of this strategy was 70% and the gain on the account was 797%.
09:29These numbers are really good.
09:32We see that it had an amazing profit factor of 3.5, 7 consecutive wins against 4 consecutive losses and a maximum drawdown of 7.76%.
09:45By the way, it took me just over 13 months to find these 150 trades.
09:51As always, remember, this is just 150 trades and the backtesting didn't have any discretion or subjectivity.
10:00If you want to trade using this particular strategy, be sure to do extensive backtesting and forward testing and customize it to your liking so you can have as much confidence as possible when trading with it.
10:12If you liked this video, feel free to hit the like button below or consider subscribing.
10:18Thanks for watching and I'll see you guys next time.
