My latest round of testing has included testing the 1 hour EURUSD to see if MACD divergence coupled with overbought/oversold signals on the Williams Percent R oscillator will yield a profitable system.

See the picture below for an example. The general parameters were as follows:

• Watch for MACD to diverge
• It helps if price is bouncing off an area of support/resistance
• As soon as you see MACD starting to diverge, look for %R to "pop" out of overbought/oversold. A pop is a convincing move.
• Target a minimum 1:1, but let it run a little more if the market is ranging or the trade is going in the direction of the trend.
• If MACD is still divergent but the current trade is stopped out, re enter on another pop in %R because sometimes the market just jumped the gun.
• Risk no more than 1% of total account per trade.
• Trade 1 mini lot at a time.

Here is a summary of the results:

• Total trades=265
• Profit trades=164 Loss trades=101
• Trades/day=0.10
• Trades/month=3
• Profit trades/month=2
• Loss trades/month=1
• Max profit trade=176.02
• Max loss trade=79.98
• Net profit=5070.20 Gross profit=9365.10
• Gross loss=4294.90
• Profit/month=60.00
• Average profit=57.10
• Average loss=42.52
• Profit factor=2.18
• Return, %=50.70
• Max lot used=0.1
• Profit probability, %=62
• Loss probability, %=38

Testing was done in ForexTester over a period of 7 years from Jan 2001 to Jan 2008. I did not optimize this trade at all so I will be going back to see how I can improve the trade. Pretty good results and a great start, in my opinion! I'll continue testing. One more round of successful testing and I will be ready to trade this thing live.  

But don't take my word for it, test it for yourself!