MACD Histogram Trading Strategy — Comprehensive Analysis
In this post we test a MACD-histogram trading strategy. We trade some strategies based on mean reversion on a sample of 77 ETFs. Those ETFs are the most liquid ones. One of the strategies we trade is based on MACD-Histogram. It’s a popular indicator we have tweaked a little bit. On a per trade basis, this is one of the best strategies we have. We have tweaked this one a little bit.
We backtest the following trading rules:
The MACD Histogram bar must have fallen 4 days in a row.
The fourth latest bar must have been below zero.
The current close of the ETF must be lower than the day before.
For short it is vice versa. However, long is a lot better than short. In general, short is a lot more difficult to trade.
In total, this strategy has generated 6669 trades on our portfolio of 77 ETFs.
This diagram (Image below) shows the average gain per trade since 2000. Among those 77 ETFs hardly any is negative.
You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/macd-histogram/