Indicator strategies are very popular among traders. And this is quite obvious: there is no subjectivity in them, you just need to follow the indicators. Let’s use the example of the popular Western strategy MacFibo to analyze how profitable such strategies can bring.
A little about indicator strategies
Of all the strategies that use indicators, the simplest are those based on arrow indicators. They give simple signals in the form of “arrows” showing which candlestick and in which direction you can open a trading position or look for entry points to the market.
Their signal can be not only “arrows”, but also other visual objects confirming the price movement in one direction or another. Note that for effective trading of signals, one such indicator is not enough.
There are also strategies that include indicators that are so artistically executed that they simply overshadow the price chart. Naturally, it is very difficult to work on them, the degree of their information content is not clear, as is the level of usefulness, respectively:
Even today you can easily make good profit using the vehicle “Sniper X”. This system does not imply the use of any indicators, and the analysis is performed on the basis of price alone. Due to this, the trader receives entry points much earlier than by indicators.
Let’s now analyze one of the indicator strategies called “MacFibo”. We will find out on what indicators it is built, what signals they give to the trader and how to trade on these signals.
MacFibo is a popular and widely discussed strategy on foreign forums. This is easy to verify – just look at the number of posts and comments on the page where it is posted. Today there are more than 1660 of them. What caused such interest in it, what attracts traders so much? Let’s figure it out.
Selection of TF and currency instrument according to “MacFibo”
From the recommendations of this strategy, it follows that the trader should work on H1 and H4 (you can try other TFs) using the following currency instruments:
- currency pair EUR / USD (euro / dollar);
- gold – GOLD (XAU / USD) (gold).
On the pages of the aforementioned forum, you can find messages and posts of traders who have worked / are working on other currency instruments. For beginners, I recommend adhering to the rules outlined by the framework of the strategy we are considering.
Algorithm of “MacFibo” operation is based on data received from the following indicators:
- Moving Average – set three MA curves on the chart at once, but with different properties;
- Fibonacci levels, in the properties of which you will need to add new levels.
Installing indicators on the chart
Three moving averages MA can be installed from the standard package of MT4 instruments by following the path: “Insert → Indicators → Trend → Moving Average”. Here, the settings for all three curves remain by default, except for the MA method, the values of their periods and color display. So, we install them one by one, adjusting the properties of each curve:
We also find Fibonacci levels in MT4 and pull them out on the chart:
- via the icon located on the quick access panel;
- following the path: “Insert → Fibonacci → Lines”.
The grid also needs to be adjusted – we need to remove unnecessary and add new levels. The chart should display 12 levels with the following values:
Fibo-grid looks like in the chart window, but it is necessary to stretch it according to the conditions of this strategy according to special rules. The subtleties of its construction depend on the direction in which we intend to trade.
Indicator signals for entering the market by “MacFibo”
In our first example, we are looking for Buy entry points.
Buy signals for “MacFibo”
- MA of red breaks through the black curve from bottom to top;
- The signal white candlestick closes – the first one after this breakout;
- The opening of the next candlestick is the moment to enter the Buy.
After breaking out and closing the first white candlestick, we set up the Fibonacci Grid as follows:
- From the low of the lowest candlestick (from the Low point) to the high (High) of the signal candlestick.
- Stop Loss under the terms of the strategy should be set at 78.6. It seems to me that this is not advisable, I suggest setting Stop Loss at 38.2.
Sell signals by “MacFibo”
Here, in principle, you can observe a similar algorithm, but in a mirror version:
- The red MA crosses the black MA from top to bottom.
- The first candlestick after the crossing is the Signal candlestick of black color, which must completely close.
- At the opening of the next candle, we enter the market by Sell.
After closing the signal black candlestick, set the Fibo-grid on the chart by stretching it as follows: from the maximum of the highest candlestick (High) to the minimum (to the Low point) of the signal candlestick.
When opening a sell deal, set Stop Loss below 38.2, and Take Profit – at 161.8.
Signals for additional input by “MacFibo”
An additional entry is an opportunity for a trader to increase profits when the price moves towards a previously opened deal. Let’s consider this situation using the example of a sell entry.
Conditions for additional entrance:
- The price moves in the direction of the main trade and moves to the level 161.8.
- The red MA curve intercepts the orange curve from bottom to top and then crosses it in the opposite direction;
- At this intersection, a black candle is formed.
- The opening of the next candle is an additional entry point.
Since the price lies between the levels of 161.8 and 200, we set Take Profit at 300. Stop Loss, according to the rules of the strategy, must equal the size of the Take Profit. In our case, it is equal to 32 points, which means that we also set Stop Loss in the size of 32 points.
Closing positions on “MacFibo”
According to the rules of this strategy, the position can be closed:
- By Take Profit;
- The position can be closed by Stop Loss;
- The deal can be closed by breakeven;
- Also, a signal to close a deal, the principle of “additional entry” can be used.
In my opinion, today we have reviewed a rather interesting trading strategy. I would like to remind you that you do not forget to leave your comments regarding this and other indicator strategies. Perhaps you already have some experience with indicator trading, it is possible that there are results for it. Whether they are negative or positive, it doesn’t matter – please write to us about them.