I Tested The MACD - Does It Actually Make Money?
Loses money
No edge after realistic trading costs
- trades tested
- 353
- per trade after costs
- -41.27bp
- winners
- 30%
- years of data
- 15.9
A review of four MACD strategies, two of which are back-tested on daily S&P 500, gold and the dollar index: (1) buy when the MACD line crosses above the signal line (histogram turns green) and sell when it crosses below, shorts the opposite way; (3) fade extreme histogram readings. It finishes by optimising the crossover rule's settings (2/60/2 on the daily S&P 500).
The exact rules we tested
- 01Instrument: SPX | Signal timeframe: 1d | Direction: both
- 02LONG when: macd.line crosses above macd.signal
- 03SHORT when: macd.line crosses below macd.signal
- 04Entry: market at next bar open
- 05Stop: none (as taught - the trade closes only on its exit rule)
- 06Exit longs when: macd.line crosses below macd.signal
- 07Exit shorts when: macd.line crosses above macd.signal
- 08Where histpct = macd.hist divided by close