MACD Signal Line Crossover: Backtest on 12 Pairs
The crossing of the MACD line and its signal line is treated as a change in momentum: long above, short below. We test the rule in its canonical form, with no filters and no parameter fitting.
How the MACD rule was specified
Position is set by a single condition: MACD(12,26,9) above its signal line means long, below means short. The rule is always in the market — there is no flat state. Stops and targets are deliberately absent, because we are testing the predictive value of the signal itself, not the quality of risk management layered on top.
MACD backtest: the numbers
Run with the portal's own engine over 518 daily bars for each of 12 pairs, costs of 1 pip round turn, canonical parameters. The method and its limitations are set out in how we run backtests.
- Median return — -7.65%, profitable on 0 of 12 pairs
- Sharpe — -0.45, drawdown — 15.3%
- Trades — 43, win rate — 39%, time at risk — 94%
- Extremes: USDCAD -1.3%, GBPJPY -23.3%
Why MACD produced no profitable pair
The result is negative on all twelve pairs without a single exception, and the reason is visible in two other figures: more than forty position changes while almost permanently in the market. Every change is paid for in costs, and the signal by construction flips whenever a move slows. In a range that means a series of consecutive reversals, each costing money and none producing a move.
What this means for the indicator
Zero profitable pairs out of twelve is an unusually clear-cut result. It does not mean MACD is useless; it means the signal line crossover, taken as a standalone entry rule, systematically loses on this sample. The indicator describes what has already happened to momentum, and that description cannot be converted directly into a trading rule. For comparison: simply holding the position on the same data returned 4.79%, and this rule did not beat it — why a benchmark is not optional.
Sensitivity to costs
One caveat specific to this rule: it is almost permanently in the market, so its result is unusually sensitive to the assumed cost per turn. Lower costs would shrink the loss, but they would be unlikely to change its sign — zero profitable pairs is too definite for that. The general limitations — a short sample, correlated pairs, a signal tested without risk management — are listed in the methodology. The data is open and the run reproduces from a script in the repository.
This material is educational and is not individual investment advice. Backtested results do not guarantee similar results in the future. Trading forex carries the risk of losing capital.
Frequently asked questions
What did MACD Signal Line Crossover return in the test?
A median of -7.65% across 12 pairs over 518 daily bars, profitable on 0 of 12, with a median Sharpe of -0.45. Simply holding the position returned 4.79% on the same data.
Does this mean MACD Signal Line Crossover does not work?
Zero profitable pairs out of twelve is an unusually clear-cut result. It does not mean MACD is useless; it means the signal line crossover, taken as a standalone entry rule, systematically loses on this sample. The indicator describes what has already happened to momentum, and that description cannot be converted direc
What is the main caveat to the MACD Signal Line Crossover result?
One caveat specific to this rule: it is almost permanently in the market, so its result is unusually sensitive to the assumed cost per turn. Lower costs would shrink the loss, but they would be unlikely to change its sign — zero profitable pairs is too definite for that.
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