ReverseEngineeringMACD

Description

The Reverse Engineering MACD study is a trend following indicator based on analysis of MACD(Moving Average Convergence/Divergence) changes. This study consists of three main plots: PMACDeq, PMACDlevel, and PMACDsignal.

PMACDeq plot represents price of the current bar at which its MACD value would be equal to the previous one. PMACDlevel plot represents price of the current bar at which its MACD value would be equal to the specified one. PMACDsignal plot represents the price of the current bar at which its MACD value would be equal to its average.

These three plots are accompanied with an auxiliary plot showing averaged values of PMACDeq. Note that the type of average is the same as the specified for MACD calculation.

 

Input Parameters

Parameter Description
price The price for which MACD is calculated.
fast length The number of bars used to calculate the fast moving average.
slow length The number of bars used to calculate the slow moving average.
macd length The number of bars used to calculate the moving average of MACD.
average type The type of moving average to be used in calculations.
macd level MACD value used in PMACDlevel calculation.

Plots

Plot Description
PMACDeq The PMACDeq plot.
PMACDlevel The PMACDlevel plot.
MA_PMACDeq Moving average of PMACDeq.
PMACDsignal The PMACDsignal plot.

Further Reading

1. "Reversing MACD" by Johnny Dough. Technical Analysis of Stocks & Commodities, January 2012.

2. "Reversing MACD: The Sequel" by Johnny Dough. Technical Analysis of Stocks & Commodities, November 2013.

Example*

*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.

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