MACD Pullback Strategy — Step-by-Step Guide & Transcript

[00:00] This is Linda an absolute legend of trading. She s A professional trader who has worked   for several hedge funds and even  started her OWN hedge fund in 2002.  

[00:12] And did I mention she made all of her  millions trading using ONE specific strategy?   Well, I was interested in lil  ol Linda and I wanted to find  

[00:26] how she became so successful with her trading. So I did what I usually do, and did some digging.   I scavenged the internet for days trying to find  the exact strategy she uses to make her millions.  

[00:39] And lets just say, after hours  of digging, I finally found it.   Linda uses the MACD as her  main component for her trades.   Now, I know what you re thinking. Oh here we go again, another macd video.  

[00:56] But Linda uses it in a way I ve  never seen it used ever before.   See, linda changed the default settings of  it to some strange numbers, took out the   histogram completely, and follows  a bizarre ruleset that completely  

[01:09] changes the way you will look at the MACD. And I m about to share it all with you right now.   Let s get straight into it. So Linda calls this strategy the anti setup.   Meaning she s trying to find the reversal point  of a trend at a major pullback point and profiting  

[01:26] from the massive move after the pullback. Let me paint a broad picture   of what we are looing for. Linda would look for a downwards move that is   starting to correct like this. Once it starts to  correct, it would do a move like this, where price  

[01:39] would start heading in the opposite direction.  Creating a pullback. Once she found this setup,   she would follow her specific ruleset in order to  find perfect entries for this specific play. Where  

[01:51] she would profit from this beautiful correction. And how she finds this specific move,   is purely with the MACD. So, let s add that to our chart.   To do this, go to tradingview. If you don t yet  have it, ill leave a link in my description.  

[02:05] Go to the indicators tab and type in  MACD. Click this one, right here.   your chart. The settings of it, will  be set to these default settings.  

[02:17] While doing my spying on Linda, I noticed  she completely changed these numbers to   Go to the settings of the macd. You are  going to change the fast length to 3, the  

[02:29] slow length to 10, and the macd length to  16. Uncheck the histogram. You also want   to make sure the average type is set to simple. I m also going to change the colors of the lines  

[02:43] for simplicity sake. I m going to make the  macd line red and the signal line yellow.   Our indicator is now setup and it s lookin good. This strategy, will work for all  

[02:55] markets and all timeframes. So let s pick a random stock.   timeframe for this example. For these examples we will  

[03:10] be looking for long trades. Now like I was saying before linda   uses the macd in a way Ive never seen used  before and she follows a very very specific  

[04:13] set of rules to find these setups. The first rule is you need the MACD   the MACDS previous high was right here. So in order for us to even consider this trade,  

[04:26] the macd line (the red line) must  go above this level right here.   Just like this. That is step one complete.   to move in the direction we are looing to trade. So in this example, we are looking for a long  

[04:43] trade. So we want the signal line to be  moving upwards. Just like it is here.   We want the macd line to revert back to  the singal and we want the both to be  

[04:56] moving in the opposite direction. Since we are looking for pull back   trades. This discrepancy in the lines is  showing signs that the market is hesitant   or unsure on what it wants to do next. Which  is exactly what we are looking for when trying  

[05:11] to find pull back trades like this one. So here, when the market is doing this   pullback. Both he MACD and signal line cross,  and start to head in different directions.   Which gives us the signal to enter the trade. Now, while doing my research Linda didn t say  

[05:27] how she uses her stop loss and take profits. So I had to do a little of my own testing.   What I found is that if you place your  stop loss right below low of the move   and your take profit at the previous high.  It works a great percentage of the time.  

[05:42] Here s another example on Microsoft. We see a big downwards move.   We then look for the MACD line to make  a new high from the previous high.   We then look for the signal to slope in  the upwards direction. Which it does.  

[05:57] Then finally we wait for the MACD line  to revert back to the signal line.   Once all of this happens, we set our top  loss right below the recent low and set  

[06:10] our take profit at the recent high.  And BOOM another profitable trade.   We then look for the MACD line to make a new  LOW from the previous low. Which it does.  

[06:23] We then look for the signal to be slowing  downwards this time. Which it does.   Then finally we wait for the macd line to  revert back to the signal line. Which it does.   We then make sure they both start to head  in the opposite direction. Which it does.  

[06:38] Once all of this happens. Set your stop  loss at the recent high, then set your   take profit at the recent low. Then yet  again, we get another perfect trade.   While doing my testing with this strategy, I will  say, it works a great percentage of the time.  

[07:29] But with that said, no strategy is absolutely  perfect. You will have times where the   strategy signals for you to enter and the  trade will hit your stop loss.