MACD IntraDay Swing

This strategy is a trend following strategy that tries to capture big swings in the German DAX index.

 

Features

This is a swingtrading strategy that trades on 4-hour bars. It is very simple, yet quite effective. It trades both long and short based on the MACD indicator and a simple moving average. It trades quite frequently, as we we do not have strict criteria for opening a trade. A simple time-based exit is utilised.

 

Indicator description

This strategy is based on the MACD indicator and a moving average.

MACD (moving average convergence/divergence) is a momentum indicator.
The main line is the difference between the “fast” and “slow” exponential (i.e. more weight is given to the more recent data points) moving averages (default settings 12 and 26 bars, respectively). The signal line is the 9-bar exponential moving average of the main line.

If the main MACD line is above zero, it can be interpreted as the increasing upside momentum. Conversely, MACD line below zero means increasing downwards momentum.

The crossovers of the main line and the signal line can be treated as the trigger for a buy signal (if the main line crosses the signal line from below), or the sell signal (if the main line crosses the signal line from above).

This strategy will open a long trade if the signal line is above 0 and if the previous bar's close is above the moving average. 

 

Strategy description

The DAX has a great tendency to trend rather than mean revert, and this makes it perfect for momentum and trend following strategies such as this one. We use a simple stop loss of 120 points and a time-based exit, which is a bit longer for short trades than long trades. Furthermore, time-windows are implemented in order to take advantage of the intraday seasonality that exist in the DAX.  The characteristics of this strategy is that it has a medium rate of winners, but the winning trades are slightly bigger than the losing trades. 

 

Performance

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 Backtest is from Juiy 2016 to February 2018. A spread of 15 pips is utilised and starting equity is 10.000.

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