Need Help Understanding This MACD EMA Strategy

[goodoboy]

Hello, 

I find a strategy that I like and would like to start manually backtesting it to understand the details of the strategy before deciding to go to sim. I am trying to understand the details of the strategy but the MACD settings are confusing me cause they are similar to the EMA settings.

Setup: 
1) 30min Chart Only 
2) 5EMA and 21  
3)  MACD- Set at 3/26/1 
4)  RSI set to 10 

Sell Entry Rules: 
1) 5 must cross below 21 on a bar close 
2) The Price Bar must close below the the 21EMA 
3) MACD must be less 0 
4)  RSI needs to be greater than 30 
5) Go short on the open of the very next bar where all conditions are met. 

Buy Entry Rules

Vice versa of sell entry rules.

Stop loss

50 pips or risk tolerance

Profit

100 pts or more

I am not sure why the MACD is needed because when the MACD signal cross above/below the 0, I notice so those the EMAs cross occur as well. I am trying to understand the purpose of the MACD for this strategy, I could be wrong, but I thought the MACD was to further confirm the trend after the EMA cross occurs? Can you please clarify for me the MACD purpose for this strategy. Here is some examples of the MACD cross occurring when the EMA cross occurs.

 http://prntscr.com/haldf6 and I attached another example. 

I thought the MACD was suppose to confirm the trend but looks like its confirming the EA cross. 

Thanks for any help I can get

[Fernando Carreiro]

goodoboy: I find a strategy that I like and would like to start manually backtesting it to understand the details of the strategy before deciding to go to sim.

The strategy is basically buy when ema cross and macd above 0. Vice versa for short. 

I am not sure why the MACD is needed because when the MACD signal cross above/below the 0, I notice so those the EMAs cross occur as well. I am trying to understand the purpose of the MACD for this strategy, I could be wrong, but I thought the MACD was to further confirm the trend after the EMA cross occurs? Can you please clarify for me the MACD purpose for this strategy. Here is some examples of the MACD cross occurring when the EMA cross occurs.

I thought the MACD was suppose to confirm the trend but looks like its confirming the EA cross.

Well, the MACD is basically a MA Fast/Slow Cross, so if the periods/frequencies of the MACD and the Moving averages are very similar, then they will basically be doing the same thing and making one of them redundant.

Since, you did not post the strategy rules, nor the Indicator parameters, this observation is just an educated guess.

Also, you don't need to supply a link to images. Just add the image to your post using the "image" button on the posts toolbar.

[goodoboy]

Fernando Carreiro:

Well, the MACD is basically a MA Fast/Slow Cross, so if the periods/frequencies of the MACD and the Moving averages are very similar, then they will basically be doing the same thing and making one of them redundant.

Since, you did not post the strategy rules, nor the Indicator parameters, this observation is just an educated guess.

Also, you don't need to supply a link to images. Just add the image to your post using the "image" button on the posts toolbar.

Thank you Fernando, 

I updated the original post and appreciate your review. After some study on MACD and this strategy I see the MACD settings are 3/26 and the EMAs settings are 5/21, which are very close to each other. I could be wrong, but I would think the MACD settings would be a bit higher to further confirm price movement. 

Thanks

[Fernando Carreiro]

goodoboy: I updated the original post and appreciate your review. After some study on MACD and this strategy I see the MACD settings are 3/26 and the EMAs settings are 5/21, which are very close to each other. I could be wrong, but I would think the MACD settings would be a bit higher to further confirm price movement.

Do you perhaps remember the following statement of mine?

... I prefer relying on my own whit, and observations of the charts I see before me, and coming up with ideas of my own. If feels more natural to do it this way and tends to be more effective then trying out other peoples' strategies when one has no idea how they came up with them or if they simply "sucked on their thumb" and out pop some nonsense that just sounded good. At least, when our strategies are our own, we know how much merit may be behind them in order to decide to pursue them or not.

In essence, try to see if there is some form of mathematical or statistical reason for the defined rules (and parameters), or if they were just mashed up with no reasoning behind it (which I am inclined to believe is the case here).

[goodoboy]

Fernando Carreiro:

Do you perhaps remember the following statement of mine?

when one has no idea how they came up with them or if they simply "sucked on their thumb" and out pop some nonsense that just sounded good.

Thanks Fernando for refreshing my memory. Lol hahahahahaha that is really funny. But make sooo much sense. I can be years questioning a strategy online with no merit or evidence or reasoning for why the strategy inventor did not clearly understand the strategy and it's parameters. 

As you stated better come up with own strategies or just stare at a simple strategy with some explination in book or online that make sense in real time on the chart and see how to upgrade it up or if it makes sense.  

Thanks