MACD Stochastic Strategy – Reliable Buy Sell Strategy with These Proven Indicators 

 December 3, 2015

By  Advanced Strategies

The MACD Stochastic Strategy is extremely powerful and reliable when used correctly. It’s a proven strategy that works in different market conditions and across different Forex pairs. Standalone, both the MACD (Moving Average Convergence Divergence) and Stochastic strategies have proven to be more than worth their while. At the same time, it is not like they do not have their own set of unique limitations. It is under such circumstances that a genuine attempt has been made to combine the best of both worlds in the form of the MACD Stochastic strategy.

Now, before delving deep into the MACD Stochastic strategy, it would only be appropriate that we take a closer look at its constituents, viz. the MACD and the Stochastic strategy, respectively.

First up, they both serve as suitable oscillatory indicators, offering insights into ranges that could offer lucrative trading opportunities among diverse forex currency pairs.

With this commonality in mind, let us look at the disparities between the two. The MACD offers excellent insights into prevailing prices and the relations that exist between them. This is thanks to the basis on which it is developed – moving averages between 12 and 26 days, with the 9 day EMA or Exponential Moving Average serving as the trigger line; the MACD being above this trigger line is indicative of a bullish phase while the same being below the trigger line is indicative of a bearish phase.

The Stochastic offers suitable insights into the kind of momentum that is present in the market; so if there is momentum on the higher side, it points towards a buying inclination while a lower side momentum would be indicative of an inclination towards selling.

See the chart below – it offers an excellent perspective on buying and selling signals in the context of the Stochastic.

Stochastic Price Signal indicator

Image Courtesy: BabyPips.com

Bringing the two together with MACD Stochastic Strategy

Bringing both MACD and Stochastic strategy can imply using really short to just about any other time frames and yet reap rich rewards while trading. In as little as a minute to trades of longer time frames, you can look forward to quality returns on your trades. Also, you need not be overly concerned about the choice of currency pairs – be it USD/EUR, GBP/USD, USD/AUD, etc. they should all work fine with this strategy as long as you get the basics right.

Ideal time frames to enter trade are when the Signal and MACD line cross, with the Stochastic also going and eventually crossing over in that identical direction. Likewise, exiting trade would be best when price momentum takes on a different direction such as from Short to Higher Lows.

The chart below offers excellent insights into trading in the context of both MACD and Stochastic trading strategy combined together:

MACD Stochastic StrategyImage courtesy: MarketPulse.com

So to sum things up, making the most of the MACD Stochastic strategy involves first getting a very good idea of the overall trend prevalent in the market, with regard to the MACD and the Stochastic. With that done, you are expected to take a certain stand as far as the direction of the trend is concerned. Now, with this also done, you finally need to enter and exit the trade as described in the previous paragraph.

Using MACD Stochastic Strategy

No doubt that both MACD and Stochastic carry their own set of unique advantages. Yet, when you combine the two together, you incrementally augment the prospects of your trade. Therefore, wherever the opportunity exists, it always makes sense to consider combining both MACD and Stochastic for the combined MACD Stochastic strategy.

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