The Magic of the Multiple Time Frame Trading with MACD

6 min read
Nenad Kerkez

Nenad Kerkez

Head of Trading

Dear traders,

The term MTF stands for Multiple Time Frame and it is a process of looking into different time frames and aligning momentum, direction, and higher time frame trend.

We always say: “The Trend is your Friend”. While the intent is to emphasise trading with the trend, the ultimate goal is to be profitable. If you want to achieve it, one of the essential things to do is to time entries in the market, mainly because it is needed for the time frame you wish to trade on. For the MTF approach to be successful, we need to align:

  • The trend on higher time frame
  • Retracement / loss of momentum
  • The entry itself

cammacd.MTF Approach to Trend Trading

What we do with MTF trading is that we essentially piggyback the momentum from higher time frames into a lower time frame. For this to work, especially for gauging trend and dynamic, we need to use the ecs.MACD indicator and I will explain how.

ecs.MACD Indicator

The MACD stands for Moving Average Convergence Divergence. It is a trend-following, trend-capturing momentum indicator that shows the relationship between two moving averages of prices. The MACD was created by Gerald Appel in the late 1970s. The MACD indicator formula is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called signal line, is then plotted on top of the MACD. This is used for buy/sell signals.

Other version is the 2 Line MACD, which can also be combined with great trading strategies. The difference is that the default MT4 MACD indicator lacks the fast signal line (instead of showing the fast signal line, it gives you its histogram).

For trading, it’s completely irrelevant as long as you use it with other tools that work in conjunction with the MACD itself. When the red and blue MAs cross on the 2 Line MACD, it is equivalent to the red MA line crossing the green histogram on the default MT4 MACD. There is no lag time concerning crosses between both indicators, they are timed identically.

What is the Trend?

The trend is a series of Higher Highs and Higher Lows (uptrend), lower highs and lower lows (downtrend). I also call it the pattern of thrusts and pullbacks.

If we see a range moving or a whipsaw market, then the trend doesn’t exist anymore. We at ECS have developed an exclusive ecs.MACD indicator that shows a trend in the following way:

Higher Time Frames

Monthly, Weekly, Daily

Source: ecs.MACD Indicator

The histogram is thick blue for an uptrend or dull red for a downtrend.

H4, H1, M15, and Lower Time Frames

The histogram is thick blue, and the blue MACD line is ABOVE the 0 lines for an uptrend. For a downtrend, the histogram is thick red, and the blue MACD line is BELOW the 0 line.

Uptrend

Source: ecs.MACD Indicator

Downtrend

Source: ecs.MACD Indicator

Momentum

When determining the trend on a specific time frame, we need to move a one-time frame lower for finding the momentum. To align direction and momentum, we must have an opposite move from the trend.

To find an entry, we must first wait for a retracement ( the buy-low-sell-high principle). The retracement on the MACD is indicated by a thinning histogram.

For example, if we have an uptrend on a daily time frame indicated by a thick blue histogram, then 4h should have a thinning histogram. That shows a 4h retracement.

Source: ecs.MACD Indicator

By aligning a daily trend with a 4h momentum, we can then move on to lower time frames and search for an entry.

Entry Approaches

For entries, some traders would use a momentum time frame, whereas others might want to drill down to a lower time frame and search for an entry. In the case of the Daily trend, H4 retracement, the entry time frame is usually H1, M30, or M15.

Traders might want to use different price action tools, confluence, candlesticks, or whatever method they see fit for entry.

Part of the cammacd.MTF Method

The cammacd.MTF has been designed to follow the logic mentioned above with slight modifications purposefully. We added not just the MACD but also the ecs. Oscillator which finds extreme fluctuations in price and provides us with powerful signals for entering the market.

Fortunately, we have had massive success with the cammacd.MTF in our Telegram channel group which you can also see on MYFXbook verified live account.

You can also trade the MTF and be on the winning side by purchasing our course and joining our Telegram signal group.

Cheers and safe trading,
Nenad

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