What the MACD Forex strategy offers you is a simplistic analysis plan that makes use of two well-known and respected indicators. This strategy was originally designed for use in the Forex realm, but can easily be applied when trading digital options. Additionally, it can be used with asset classes aside from currency pairs. The strategy utilizes Parabolic SAR buy and sell signals which receive verification from the MACD. Standard settings with 30 minute bar charts are used to increase the indicator accuracy.
Strategy application is quite simple. The first signals comes from the Parabolic SAR. This is going to provide you with the Call or Put decision, after which you simply need to trade along with the trend. The MACD comes after, working to verify that signal. When the SAR reveals the entry, the MACD needs to cross the 0 line from below to provide validation. A weak MACD tells you to pass on the trade for the time being. The same goes for reversal. When the SAR signals Put, wait for the MACD to pass the 0 line from above.
One of the main benefits of this digital options strategy is that it uses two indicators and does require validation. It works very well with currency pairs, but with some slight adjustment, can also be used along with any underlying asset. The analysis is centered around the 30 minute chart, but you could apply your findings with expiry times of 30 minutes or less. Some use this strategy in conjunction with hedging or straddle strategies. It really does offer up many of the key ingredients of a solid strategy.
With all of that said, some drawbacks do exist. For starters, it does not do the best job of accounting for the trend. There needs to exist some concern over the trend, or at a base level, signal unity for selected time frames. Additionally, you have to remember that the MACD acts as a lagging indicator. This means that you could miss some opportunities while you wait for the 0 line to cross over. However, if trading the trend, a weak MACD could still prove beneficial.
This digital options strategy does provide clear signals that are tough to mistake. Do be sure, however, to use it along with some additional means of trend identification so as to pass on false signals. This strategy is excellent for skilled traders, but can also be used by novices with just a little practice and a number of mock trade tests.