How to get more than 60% win rate in Trading? The MACD strategy we tested 100 times, got
more than 60 percent win rate on its own. But the MACD indicator is nothing special,
it is definitely not the holy grail. But if you have been trading for a while, you already
know that the MACD strategy we discussed on the Trading Rush Channel, is showing something
really important on a trading chart. Imagine this, there is Bill the first, there is Bill
the second, and there is Bill the fundamental. Let's say Bill the second drives a car like
Tesla with a built-in navigation system. On the other hand, Bill the first and Bill the
fundamental are driving with no navigation systems. Let's say all three Bills want to
get to their work. When Bill the first takes his usual route to his work, he realizes that
there is a roadblock. There is some kind of important event taking place ahead. Since
he can't go any further, he has to take a U-turn. After taking a U-turn, Bill the first
finds another route that takes him to his destination. Then there is Bill the second
with his navigation system. The navigation system alerts Bill the second about the roadblock
and shows the new route that everyone is taking. Then there is Bill the fundamental guy, who
already knew about the event and took a different route in the first place without taking any
help from a navigation system. If you look closely, you will notice that Bill the first,
Bill the second, and Bill the fundamental are similar to a price-action trader, an indicator
trader, and a fundamental trader respectively. And all three kinds of drivers made or changed
their decisions, because of the same event. Bill the first had to take another route because
he saw the roadblock. Bill the second's navigation system indicated him about the roadblock,
so Bill the second also took another route to his destination. And since Bill the fundamental
did his research and already knew about the event, he was already planning to take the
new route to his destination. Even though all three Bills noticed the event in a different
way, the next decisions were almost the same: "Take the new route".
There are three kinds of traders in the forex and stock market. The ones who use indicators
like Bill the second, the traders who trade by looking at only the price action, and the
ones who look at fundamentals before taking the trades. Let's say the fundamental trader
was expecting the price to move in the upward direction because of an event. According to
the fundamental trader, any pullback or discount in this upward move is an excellent buying
opportunity. The price action trader sees an uptrend pattern, and the indicator trader
uses a moving average like the 200 period moving average, and comes to the same conclusion
that the price is in a good uptrend, and any pullback is an excellent buying opportunity.
Now let's say, Bill the fundamental took a trade when the price was right here. According
to his research, the price is expected to bounce back up. And let's say price does start
to go in the upward direction. Let's say Bill the fundamental is right, and this is the
end of the pullback. Maybe there is some kind of event that will have a positive impact
on the market. Bill the first who, is a price action trader, sees that the price is making
an upward move, and enters the trade when the price makes a higher swing high and higher
swing low pattern. On the other hand, since Bill the second is an indicator trader who
likes to trade in the direction of the long-term trend, he uses a trend following trading strategy
like the MACD strategy. If you look closely, this scenario is quite similar to the traffic
scenario we saw earlier.
In the traffic scenario, all three kinds of drivers made a similar decision. In this scenario,
all three kinds of traders also made a similar decision. And you can say that this reversal
point is like a roadblock. In the strategies tested 100 times series, I tested many different
trading strategies 100 times. But in most of those videos, I recommended setting the
stop loss using the pullback. The MACD strategy that got a 60 percent approximate win rate
after testing 100 times, also used the pullback stop loss.
In an uptrend, if the price gives a pullback, and you enter near the end of the pullback,
setting the stop loss below the pullback is a really good idea. Now if you set the stop
loss below the pullback it doesn't mean that it won't get hit. Trading is a probability
game. Nothing is 100 percent. Price can break the pullback support and hit your stop loss,
but if you set your stop loss below the pullback, price will have a difficult time crossing
it.
In the second scenario, Bill the second who used the MACD trading strategy that got a
high win rate on the Trading Rush Channel. The MACD indicator is a momentum indicator,
and in an uptrend, we use the MACD trading Strategy to find the end of the pullbacks.
In simple words, we look at the MACD indicator to see if the downward momentum of the pullback
is decreasing or not. In the second scenario, the entry according to the MACD Trading Strategy
was right here. And even though an indicator trader like Bill
the second, who didn't know the reason why price reversed from this area like Bill the
fundamental did, by setting the stop loss below the roadblock, he has unknowingly increased
the probability of winning even more. If you have watched some of the latest videos on
the Trading Rush Channel, you know I had a high win rate in the last two months. Some
of those trades I shared in the form of a live trading video. If you have watched those
videos, and if you are supporting Trading Rush on Patreon, you already know that I usually
set the stop loss below or above the pullback.
Since the MACD video was uploaded on the channel, many have emailed me saying that they are
getting a better win rate with the MACD Trading Strategy than they used to get with their
previous strategies. You probably heard someone say that trend is your friend, and you should
always trade in the direction of the trend to have a higher probability of making money.
One of the reasons the MACD Trading Strategy got a high win rate, was because it gave entry
signals in the direction of the trend. Furthermore, MACD strategy tries to give an entry signal
near the end of the pullback. And since I used the pullback stop loss while testing,
it got a 60 percent approximate win rate when we tested it 100 times.
Someone will say "Indicator Strategy is not good, and price action is the only way to
make money". But in reality, there are people who trade with no indicators and make money,
there are traders who use indicators and make money, and there are people who do fundamental
analysis and make money, and amateur traders end up arguing that one is better than the
other. One is not better than the other. One can make money without using an indicator,
and one can make the same profit with an indicator. If you tell a lawyer to do an operation, and
tell the doctor to go to court, the end result probably won't be good. MACD crossover was
nothing special, MACD is just an indicator that is showing the increasing and decreasing
momentum. But if you use it in the right place, it will do wonders for you.
Furthermore, combining indicator strategy with the price action, can significantly increase
the overall win rate in trading. Since the start of this year, I have shared 18 live
trade analysis on Patreon, and 12 of them reached the profit targets. Most of the trades
had a 1.5 to 1 Reward Risk Ratio, and some trades had a 1 to 1 reward risk ratio because
there was a support resistance nearby. So in the last two months, the live analysis
I did on Patreon had a win rate of 66 percent. And in the stock market, the win rate I had
was more than 70 percent. The point is, combining indicator strategies with price action got
me a high win rate in trading, so you can give it a try as well if you want. I have
already talked about how I find charts and analyze setups on this channel, and on the
Trading Rush Patreon Page. Check them out if you want. Just remember that just because I
or someone else got a high win rate by combining price action and indicator strategy, doesn't
mean everyone will get the same win rate. With an indicator strategy, there is a good
chance that everyone who trades with it will get a similar win rate. But the win rate with
a price action strategy will depend on how good you are at identifying the price patterns.
Trading is a game, where an impatient trader loses money, and the patient person makes
more money.
This is a normal trading chart. But if you look at the reversal points as a roadblock,
you will probably notice some of the important price levels. In this uptrend, price went
in the upward direction, and then gave a pullback. When the pullback was over, MACD
gave a long entry signal. In this setup, we would have entered near the MACD signal, and
would have set the stop loss below the pullback. Why below the pullback? Well, because it
looks like price found support at this price area. In other words, a roadblock. Since this
is an uptrend, the price can move in an upward direction after this pullback. When that happens,
this trade will make a profit. If it does not move in the upward direction, the stop
loss will be hit and we will book the loss.
In this example, the price made a move up. Then gave another pullback. Near the end of
this pullback, MACD gave another long entry signal. Again we will enter at the MACD signal,
and set the stoploss below the pullback. As you can see, the price made a move in the
upward direction.
Now if you find easily identifiable roadblocks, or in other words, if you find reversal points
that are easier to spot, you will notice that these price areas act as strong support and
resistance areas.
On this chart, we can see that price reversed from these 6 price points. And if you scroll
a little bit to the right, you will see that after making a move down, the price came back
up and these price points were acting as a strong resistance. Price reversed from this
resistance area, and made a move down. Then it came back up, and reversed from the resistance
area again. Price reversed from the resistance area, not one, not two, but three times before
finally breaking above it.
Setting the stop-loss below the pullback in an uptrend, is like setting the stop-loss below
a support level, and setting the stop-loss above the pullback in a downtrend, is like setting
it above the resistance level. One of the first things we learn as a beginner trader,
is that price has a higher probability of reacting from the support and resistance areas.
By setting the stoploss below or above the pullback, we can decrease the chances of price
triggering the stop loss, and increase the probability of winning.
That's all! Like the video if you liked it. Subscribe and ring the notification bell,
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