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ZigZag & Fibonacci (+ MACD) Trading Strategy is a strategy based on the values of three indicators: ZigZag, Fibonacci and MACD.
This strategy is universal and suitable for most Forex trading activities. To use this trading strategy, you must have the skills to use the listed indicators. You will find all the detailed information with a description of these indicators in the Indicators section on our website.
Fibonacci setup
To start working with the strategy, we first need to slightly change the parameters of the Fibonacci grid. To do this, go to the Fibonacci settings and delete all levels, leaving only the levels 0.0 and 100. After that, add 1.3 in the Level field and 130 in the Description field to the indicator. Thus, we create a new level in our Fibonacci indicator, which is necessary for the ZigZag & Fibonacci (+ MACD) strategy.
Signal search by ZigZag & Fibonacci (+ MACD) strategy using the example of searching for a long position entry on the EURUSD pair on the H1 timeframe
1. After applying the MACD indicator on the chart, we need to find the last divergence (convergence) closest to the current price on the MACD indicator. If it is not, then there is no point in peering at the chart in attempts to find an entry point for our trading system. The presence of MACD divergence is the main condition for our trading strategy.
2. If there is divergence on MACD, look at the ZigZag indicator previously plotted on the chart so that it indicates to us which waves the Fibonacci indicator should apply. Using ZigZag, we find the last two waves - the wave on which the divergence formed and the wave preceding it. We draw the grid of the Fibonacci indicator from the lowest point of the divergent wave to the lowest point of the wave preceding it.
3. After we have applied Fibonacci, we wait when the price touches the level of 130. This is the level of opening a buy deal. If the price touches this level, we open a long position.
Stoploss and Takeprofit
Stoploss is recommended to be set based on the Fibonacci testimony. The number of points (on a five-digit basis) of the price between levels 0 and 130 times two. In our example, there are 40 points between these levels. So the stoploss will be set at a distance of 80 points from the opening price of the deal.
Takeprofit should always exceed 3 times the Stoploss. In our case, since the stoploss is set at a distance of 80 points from the opening point, takeprofit will be set at a distance of 240 points from the opening price.
Similarly to the example of searching for a signal for a buy position, a search for sell signals is performed, but with opposite values.
Conclusion
This strategy is a universal trading strategy that can be applied to almost all trading assets. In the considered example, the strategy was used on the H1 timeframe. But it can also be used on other higher or lower timeframes. The main thing in this strategy is your ability to find divergences and wrap them in your favour.
