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The Black Dog system is a well-known trading system for forex traders. The system trades in the direction of the trend and can be used to trade all forex pairs. The Black Dog system combines two of the most traditional technical analysis indicators: moving averages and MACD. These are the system’s four components and their respective functions:
In order to determine the overall trend, two long-term moving averages are calculated in the background. They are not visible. The system’s creator calls these the “black dogs”. If the black dogs are bullish the chart background is green. If the black dogs are bearish the chart background is red.
In order to calculate a high-low channel, two medium-term moving averages are used. This channel is green when the medium-term trend is bullish and red when the medium-term trend is bearish.
A short-term moving average is calculated to help to identify entry opportunities. This is the blue line in the chart.
The Black Dog’s MACD Histogram serves as a confirmation tool. If the MACD histogram is green, the trader looks for buy signals. If the MACD histogram is red, the trader should only look for short sell signals.
This example shows the Back-Dog system’s four components. The coloured chart background, the high-low channel, the short-term moving average and the MACD histogram.
The designers of the Black Dog system use several ideas for signals in combination with their Black Dog system. The system is therefore not a trading signal by itself. Traders can use the system in combination with other ideas for trading signals they may have.
This example shows how the four Black Dog components are jointly used and interpreted. In this case, as a support for a buy signal.