MACD Histogram Trading Strategy - Rules, Setup & Backtest

In this post, we look at the MACD histogram. 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 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.

Entry is on the close. The exit is on the first day when the close is higher than the day before. Here is an example (exit was on the close the day after because the ETF rose in price)

We have tweaked this one a little bit to check how it performs. Check here >>

https://www.quantifiedstrategies.com/macd-histogram/