MACD crossover strategy
A MACD cross is a momentum shift. Take it only when it agrees with the trend and happens on the right side of the zero line.
Try MACD crossover strategy on a real day
A real market day with the date hidden. Run the checklist on the chart, then buy, sell or stay out: the real candles answer.
Check every point of the list before you decide. Stay out if the setup is not there.
Gerald Appel created the Moving Average Convergence Divergence in the late 1970s. It subtracts a 26-period EMA from a 12-period EMA and plots a 9-period EMA of the result as the signal line. Thomas Aspray later added the histogram.
Why it works
When the MACD line crosses above its signal line, short-term momentum is turning up. Taken alone, these crosses fire constantly. Filtered by the trend, they become timing signals for pullbacks.
A bullish cross that happens below the zero line in an uptrend means a pullback has ended while the larger trend is intact: momentum is resetting from a low level.
The rules
Setup
- Price above the 200-period moving average.
- MACD (12, 26, 9) has pulled back toward or below the zero line.
Entry
- Buy when the MACD line crosses above the signal line.
Stop loss
- Below the most recent swing low.
Exit and management
- Target 2R, or exit when the MACD line crosses back below the signal line above zero.
Filters that improve it
- Ignore crosses against the 200-period average.
- Ignore crosses when the lines are flat and tangled around zero.
Worked example
Illustrative US 500 example on 1H: the index is above its 200 average. A pullback takes the MACD to −4. The MACD crosses above the signal line at 5,520. Buy, stop below the swing low at 5,505, target 5,550.
Illustrative numbers, not a recommendation.
Common mistakes
- Trading every cross on a 1-minute chart.
- Buying a bullish cross far above zero, late in the move.
How to practise it
In Candlemind add the MACD template from My indicators and turn on the SMA 200. Note whether each cross happened above or below zero and compare the results.
Pre-trade checklist
- Price above the 200 average
- MACD pulled back to or below zero
- MACD line crosses above signal
- Stop below the swing low
- Target 2R or opposite cross
Frequently asked questions
What are the standard MACD settings?
12 and 26 for the EMAs and 9 for the signal line.
Which timeframe is best for MACD?
Signals are more reliable on 1H and above. On very low timeframes the crosses are mostly noise.