The MACD Trading Strategy of a Market Wizard

Summary

In this trading tutorial, Garrett, a senior trader, unveils a unique MACD strategy inspired by market wizard Linda Raschke. Known as the '310 Oscillator,' it uses customized MACD parameters to identify trend reversals. Garrett explains the traditional MACD and then contrasts it with Linda's approach, demonstrating how to spot the 'anti' pattern for potential trading opportunities. The video encourages traders to incorporate this tool into their strategies, emphasizing the importance of research and adaptability in trading.

Takeaways

• 📈 The MACD (Moving Average Convergence Divergence) is a popular indicator among traders, but its effective use is not widely understood.
• 🧙‍♀️ A market wizard known as the 'MACD trading genius' has customized the MACD to make significant profits, and her strategy is the focus of the video.
• 📚 Garrett, a senior trader, shares his research on the MACD and introduces the '310 oscillator', a custom setting of the MACD used by the market wizard Linda Raschke.
• 🔍 Garrett emphasizes the importance of continuous research and learning in trading to gain an edge and adapt to market changes.
• 📉 The MACD line and signal line are key components of the indicator, with the MACD line showing the difference between two moving averages and the signal line being an average of the MACD line.
• 📊 The '310 oscillator' uses a fast moving average of 3, a slow moving average of 10, and a signal line of 16, differing from the standard MACD settings.
• 🚀 The 'anti' pattern, a specific price action setup, is identified by the MACD line reverting against the signal line after a new momentum high or low.
• 📝 Adam Grimes' book 'The Art and Science of Technical Analysis' and his blog provide examples of the anti pattern in price action.
• 📉 The anti pattern can be used to identify the first pullback in a new trend, which can be a potential entry point for trades.
• 🔄 Garrett tests the anti pattern on various charts and time frames, noting that it works most of the time but not always, highlighting the importance of context.
• 💼 The video concludes with a call to action for traders to improve their skills and an invitation to learn more about trading opportunities at SMB Capital.

Q & A

What is the main topic of the video?

The main topic of the video is an effective and profitable way to use the MACD indicator in trading, as discovered by a market wizard known as the 'MACD trading genius'.

Who is Garrett Dryan?

Garrett Dryan is a senior trader at one of the top proprietary trading firms in New York City, who shares his research on a unique MACD setup.

What is the significance of the MACD indicator in trading?

The MACD (Moving Average Convergence Divergence) indicator is a momentum oscillator that measures the difference between two moving averages, and is widely used by traders to identify trends and potential trade signals.

What are the typical settings for the MACD indicator?

The typical settings for the MACD indicator are a fast moving average length of 12, a slow moving average length of 26, and a signal line length of 9, using exponential moving averages.

What custom parameters does Linda Rajan, the 'MACD trading genius', use for her MACD indicator?

Linda Rajan uses a custom MACD setting with a fast moving average length of 3, a slow moving average length of 10, and a signal line length of 16, using simple moving averages.

What is the 'Anti' pattern mentioned in the video?

The 'Anti' pattern is a setup that occurs when, after a new momentum higher low, the MACD line reverts and goes against the signal line, indicating a potential trend reversal.

How does the MACD indicator relate to price action?

The MACD indicator can be used to identify specific price action setups, such as the 'Anti' pattern, which can help traders identify the first pullback in a new trend.

What is the role of research in a trader's process according to the video?

Research is crucial for traders as it helps them improve their trading strategies, gain a strong foundation, and spur ideas that can provide an edge in the market.

How does the video suggest traders can use the MACD indicator in their models or alerts?

The video suggests that traders can use the MACD indicator as part of a model to screen for extended names and then look for an 'Anti' signal for the price action they want to see, or as an alert for specific setups.

What is the purpose of the free online presentation mentioned at the end of the video?

The purpose of the free online presentation is to share how individuals can get an interview with SMB Capital to become an in-house or remote trader, trading the firm's capital without risking their own money.

What are the criteria for being considered for an interview with SMB Capital as a trader?

The criteria for being considered for an interview with SMB Capital include being highly ambitious and determined, fitting the firm's culture, and not necessarily being a currently profitable trader as they prefer to mold traders with their methods and techniques.