Greetings, humans! As promised, here are the yearly backtest results for the MACD(addy) Divergence System by jenesaisquoi. The system generated only a few trade signals but the results haven’t been so bad:
I’ve decided to run the backtests on the 4-hour chart of EUR/USD from June 1, 2013 to June 1, 2014. Aside from using the MACD and stochastic parameters that the owner specified, I also used his recommendation to trail the stop and to use stochastic as an exit signal as well. Instead of placing the initial stop on nearby support or resistance though, I thought of reducing the subjective aspect by simply setting a 100-pip stop.
From my observation, the stochastic works pretty well in cutting losses in case the divergence doesn’t play out so well. It’s also a good exit signal when the trends don’t last very long, although it seems to prevent the trader from staying in a longer-term ones.
Also, the stochastic and MACD combination for spotting divergences and for confirmation appears to work better in predicting trend continuations rather than reversals. Perhaps one way to tweak this could be to stick to hidden divergences?
Do let me know if you have any other recommendations for this system or if you’ve conducted a few backtests yourself! In the meantime, I will carry on with my forward testing for this month and keep you posted on the results next week. I will also be looking at the 1-hour time frame to see if the MACD(addy) Divergence System works better there.
The quest for the Holy Grail system continues!
*beep beep boop beep*