Moving Average & MACD
- VFX Blog
Moving Average&MACD - proven indicators on the binary options market, they are working very good in a case to proper use. Moving averages and MACD oscillator at any settings are delayed, like all other technical indicators. Therefore, their use of small timeframes and turbo options with a duration of no more than 3-5 minutes gives a large number of false signals. An exception to the rules is adaptive strategies, as in the vfxAlert app, where they proved themselves to be an additional tool for confirming automatic signals. The strategy is a classic combination of the trend indicator (moving averages) and the oscillator (MACD).
Characteristics of the strategy
• Type: scalping and turbo options;
• Chart period: 30 second - M5;
• Currency pairs: any except cryptocurrencies;
• Trading time: All trading day except a period of strong fundamental news.
How to trade
Adjust indicators in your trading system:
Exponential Moving Average (EMA):
• Period = 14
Weighted Moving Average (EMA):
• Period = 7
• Fast MA period = 12
• Slow MA period = 26
• Signal MA period = 9
• CALL: both moving averages are directed upwards. The "fast" WMA crosses the "slow" EMA from the bottom up. The MACD histogram is above zero;
• PUT: the opposite conditions - the moving averages go down, the WMA from top to bottom crosses the EMA. MACD is below zero.
The intersection of the MACD histogram of the zero levels can be regarded as a leading signal, but the final decision to open the position to be taken by at he vfxAlert signal of an Adaptive algorithm and WMA/EMA.
2-3 minutes for turbo options, in other cases not less than 3-5 candles of working timeframe.
How to open the position:
The position opens on the first candle after the crossing of the moving averages, and it must necessarily close above the WMA. MAs have a longer delay than MACD, so if the MACD condition is met at the next candle, this signal can also be considered to open the position
Some bits of advice:
• Use a fixed option volume or change it depending on the strength of the vfxAlert signal, as in the attached video. But do not apply Martingale with doubling the losing deal - in seconds and minutes of time it often leads to loss of deposit. The strategy gives a lot of signals and it is better to enter only the most reliable ones;
• It is necessary to wait for the intersection of moving averages, even if the MACD histogram has crossed the zero level otherwise it is only a single price pulse and not the trend at which the option can be opened;
• In the presence of a long trend, the strategy can be used on large timeframes, such as M5 and M15, you only need to select the appropriate signals of the adaptive strategy vfxAlert. Indicator settings cannot be changed.
• Trading on the news is one of the most difficult options and most scalping strategies give false signals at these moments, but if there was a strong signal before the exit, both on vfxAlert and on indicators it can be considered as a leading one;
The abbreviation "name" of the indicator stands for - Moving Average Convergence / Divergence. In translation - the convergence/divergence of moving averages, and this is what the trader shows - the degree of divergence of the Moving Average lines. It was developed by Gerald Appel, who before becoming interested in financial trading, was a psychologist by profession and a photographer by vocation. However, perhaps it was the creative approach and knowledge of human psychology that allowed the author to create such a unique oscillator.
The MACD indicator consists of a histogram and three moving averages: exponential MA lines with a period of 12, 26 and 9. Of course, only two sliding lines are visible on the chart, however, the value of the long moving is calculated from the value of the short line with the smoothing of the difference. Why are the lines smoothed out? Thanks to the smoothing of removals, one can see the real direction of the trend, removing all market noise and deceptive manoeuvres of quotations. It is such a simple composition that makes the indicator so popular because not every trader likes archival algorithms with a multilevel mechanism.
On the price chart MACD, like an oscillator is located in the so-called "basement", demonstrating the dynamics and direction of the trend, therefore, applying the oscillator on the chart, you can see the following picture:
For binary options trading three signals are used:
• Crossing lines with each other with a certain orientation;
• Crossing zero-level removals;
It all depends on whether MACD is used in combination with what technical means since it acts as an instrument of confirmation of trade signals with other indicators. This indicator works effectively in any market, but it is best to use a technical tool with a well-defined trend and moderate volatility.