The Trend-Following MACD + RSI Strategy: How to Ride Market Trends with High Probability
The Trend-Following MACD + RSI Strategy: How to Ride Market Trends with High Probability
This strategy combines MACD (trend-following & momentum) with RSI (overbought/oversold conditions) to confirm trend strength before entering trades. It works best in strong trending markets.
Indicators Used:
- MACD (12,26,9) – Identifies trend direction & momentum shifts.
- RSI (14) – Helps filter bad trades by identifying overbought/oversold conditions.
- 50-period Simple Moving Average (SMA) – Confirms overall trend direction.
Entry Rules:
Buy Entry (Bullish Signal)
- MACD Line crosses above the Signal Line.
- RSI is between 40 and 60 (not overbought, not oversold).
- Price is above the 50-SMA (confirming an uptrend).
Sell Entry (Bearish Signal)
- MACD Line crosses below the Signal Line.
- RSI is between 40 and 60 (not overbought, not oversold).
- Price is below the 50-SMA (confirming a downtrend).
Take Profit (TP) and Stop Loss (SL):
- TP = 2x ATR (Average True Range) from entry price.
- SL = 1x ATR below the last swing low (for buy) or above the last swing high (for sell).
- Risk-to-reward ratio = 1:2, ensuring profitable long-term trades.
Strategy Validation:
✅ Only trade when all three indicators confirm the same direction.
✅ Avoid trades if RSI is over 70 (overbought) or below 30 (oversold).
✅ Wait for MACD & RSI to align before entering.
How the Strategy Reacts to News Events:
- High-impact news (e.g., NFP, interest rate decisions) → Increased volatility → Higher false signals.
- During news, MACD crossovers may occur too frequently → Higher SL risk.
- Best approach: Avoid trading 30 minutes before/after major news releases.
Final Thoughts – Is This Strategy Right for You?
The MACD + RSI strategy is a high-probability trend-following method that filters bad trades using RSI and confirms trend direction using the 50-SMA. It works well in stable markets but should be avoided during high-impact news releases.
📌 Want to Test This Strategy?
Try applying MACD + RSI settings on different markets and analyze how it performs in different market conditions!
