UPDATED ON 21-MAY-2012:
We’ve made some tweaks in version 1.1:
1. Bar adjustment is now in play, analyzing 2 previous bars for better trend determination.
2. Added alert functionality.
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The MAC-Fibo trading strategy took home the crown for March's Best Forex Trading System Contest over at BabyPips.com! This winning system leverages three moving averages to spot trade opportunities, while using Fibonacci extensions to set your stop-loss and profit targets.
This post introduces you to the indicator derived from the MAC-Fibo trading strategy. For a deeper dive into the strategy, check out the detailed write-up here and don’t miss the discussion on the BabyPips forum here.
Trading Signals Explained
- Short Signal:
When the 5EMA crosses below the 20SMA:
- Mark 2 points:
Point A: The close price of the candle confirming the downside crossover
Point B: The highest price of the preceding wave before the crossover
- Profit Target: @ 161.8 Fibonacci level
- Stop Loss: Set at a maximum of 38.2 (minimum @ 78.6), depending on your risk appetite. - Long Signal:
When the 5EMA crosses above the 20SMA:
- Mark 2 points:
Point A: The close price of the candle confirming the upside crossover
Point B: The lowest price of the preceding wave before the crossover
- Profit Target: @ 161.8 Fibonacci level
- Stop Loss: Set at a maximum of 38.2 (minimum @ 78.6), depending on your risk appetite.
Exit Strategy: For trades that are going against you, if your stop loss hasn’t been triggered, consider exiting if the 5EMA crosses the 8SMA in the opposite direction of your open trade.
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