BackTesting Report Presents The Official Study Guide For The Truth About MACD Video Series

Transcription

1 BackTesting Report Presents The Official Study Guide For The Truth About MACD Video Series

2 Course Overview How to Make MACD Work for You How MACD Signals Are Used and Misused How BackTesting Helps You Choose a Strategy BackTesting Results of MACD Strategies How to Pick the Best MACD Strategy When NOT to Rely on MACD Critical Skills to Manage Risk Bringing it All Together: Trading with MACD Trade with a Plan Calmly decide what you will and will not do And how much you ll do it with! Write it down Track how well you follow your plans Keep it simple! Fill Out Form to Create Plan (Please see separate file) Choose Markets Backtesting Report done on Stocks Adjust plans for Options, Futures, Forex Lower win rate presents dangers with leverage Consider select markets or scanning Time Our Most Valuable Resource Plan to use it wisely When do you have free time for markets? When are you most likely to be in the zone? Are you long-term or short-term trader? Create consistent plan BackTesting Report 2010 Page 2 of 6

3 Course Overview Continued: Choose Trade Directions Backtest results: MACD Divs performed better long than short o For stocks during most of our test periods What other indicators can help you decide market direction? Select Signals This Course Focuses on MACD MACD Div vs EMA Crossovers (XOs) Consider trendiness of market MACD Lines vs MACDH Consider length of trade, frequency of opportunity Select Parameter Settings Standard settings get the most use Slower had fewer trades and bigger winners Faster maybe better for shorter term entries Minimum volume gives liquidity Price parameters optional Decide When to Take Profits Choose Signals or Profit Targets Long Trades For EMA XO, tested exit when EMAs cross down or price breaks 200-day SMA For MACD Divs, consider slower exits Don t count on MACD + ADX combination Short Trades MACD lines cross up was only viable exit tested Select Protective Stops Use Stop Loss Not Stop Limit Orders Select type and distance of stop See Exit Strategies Reports for more insight Avoid trailing stops Calculating price that forces MACD Line lower also backtested well MACD Histo Stop is arguably too close BackTesting Report 2010 Page 3 of 6

4 Course Overview Continued: Size Appropriately to Profit And to Live to Trade Another Day Trading account is a portion of your net worth Per trade risk < 1% of trading account $1000 setting is for ease of calculation Be sure to adjust to your own situation Choose a system of sizing trades Use it consistently Choose Order Types Practice Entry in Safe Environment Back tested next day Market on Open orders Likely worst case scenario Trade-offs in order types Market - always gets done but may slip price Limit - holds price but misses strong movers Stop-In - reduces fizzles but slips price Choose Tools to Support You Set up and Practice Before Trading Scan markets or select chosen few Choose consistent chart view Don t mix up Appel s histogram and MACDH! Forward test before trading live Practice and double-check order entry Consistent Trade Management habits are key How to Tell if the Plan is Working: Track Performance Your performance Missed signals Jumped system Pilot Errors Flawless Execution Emotions, perceptions, and life events System performance Win rate Results distribution Equity curve BackTesting Report 2010 Page 4 of 6

5 Course Overview Continued: MACD Pitfalls to Avoid Be alert to changing conditions Be wary of drawn-out bottoms and quick tops Don t go against a fast-moving trend based on MACDH divergence signals Low win rate can wipe-out leveraged accts Overtrading on Histogram upticks MACD Divs on Daily charts coarse Intra-day charts for swing traders On intra-day charts, opening gap often causes MACD Divergences that fizzle Trading against MACD Divergences Turn Plans Into Consistent Action Congratulate Yourself on Steps Done Turn Plans Into Consistent Action Congratulate Yourself on Steps Done BackTesting Report BackTesting Report 2010 Page 5 of 6

6 Required Disclaimers Trading involves risk of loss and may not be suitable for everyone. The author actively trades stocks and ETFs. By the time you see this video, she may or may not hold a position in any instrument mentioned in the video. This video class is for educational purposes and is not a recommendation to buy or sell securities. We are an affiliate of StockFinder by Worden Brothers, Inc. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. BackTesting Report 2010 Page 6 of 6