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Using Study Subgraphs Difference instead of MACD


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Using Study Subgraphs Difference instead of MACD

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  #1 (permalink)
Brooklyn, New York
 
Experience: Intermediate
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Reggy's Avatar
 
Posts: 18 since Apr 2010
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Using the SierraCharts Substudy Difference study with 4hull ma's gives a very broad overview of market structure at a glance. It can show convergence and divergence at the same time, for example convergence of the 55hull & 144hull ma's, and divergence of the 8hull & 55hull ma's. In effect, it maps the 'rip tides' and 'undertows' of the market, to use a Maritime analogy. As noted on the chart, I have 4 Hull ma's on Chart Region One with periods of 8, 55, 144, 377. In Chart Region Two, there is a difference study of 55hull & 8hull, 144hull & 55hull, and 377hull & 144hull. I'm hoping someone finds it useful, and maybe someone cares to add improvements or suggestions for alerts, backtesting or anything else that is helpful.

All the Best,
Reggie

...Oh can't you see-e-e-e, euro belong to me-e-e-e...
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Market Wizard
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MACD

For the default MACD the difference between two EMAs is calculated and displayed as the raw MACD. The raw MACD is then smoothed to obtain the signal line. The histogram is the difference between raw MACD and signal line.

Awesome Oscillator

The Awesome Oscillator follows the same lines, but uses two SMAs. The raw difference between the two SMAs is smoothed to generate a signal line. The histogram is obtained by subtracting the signal line from the raw difference.


Alternatives

A raw MACD can be constructed from any type of moving average by substracting the slow moving average from the fast moving average. You can even go further and use two different types of moving averages.

The result will always be a proxy for momentum. The histogram is the first derivative of momentum.


Looking for divergences

If you look for a divergence, it is not obvious whether you should use the momentum (raw MACD, 1st derivative of price) or the derivative of momentum (MACD histogram, 2nd derivative of price). A divergence on the raw MACD means that momentum slows down, a divergence on the histogram means that the momentum increase (or decrease) on the current leg does not match the momentum increase (or decrease) on the prior leg.

Best use momentum, but have a look at the derivative of momentum, if the absolute amount of momentum is small.

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@Fat Tails

Thanks for the good info and your rapid response. Sorry bout the delay in response, but I finally found something of interest to post.

25wins and 1 small loss all day July15 on EURUSD. I know I must be missing something.

The general idea, that all the MA's should be in confluence, comes from Nick Kanger won the Olympic Bronze medal for Forex trading in 2008. Out of over 50,000 North American Forex Traders entered in the FX SOLUTIONS OLYMPIAN FOREX TRADING CONTEST, ProAct Traders LLC Vice President Nick Kanger took the Bronze medal. The contest ran from August 10th through the 25th matching the athletic competition in Beijing. Mr. Kanger took the bronze medal with a 116.2% increase in his equity account in just 15 days.


Bullish Entry: (opposite for bearish )
1. 8hull ma hooks up
and
2. 8hull ma > 55hull ma
and
3. 55hull ma hooks up
and
4. confluence with candlestick
support/ resistance

Bullish Scale-in, Scale-out:
1. 144hull ma confluence
2. 377hull ma confluence

Bullish Exit:
1. 8hull ma hooks down

The 4hull system is just for setups, and I intend to manage entry, exit, and risk/reward on 165t, 55t charts with momentum.

I hope somebody finds this useful, or can steer us in the right direction.

Thanks and All The Best,
Reggy

...Oh can't you see-e-e-e, euro belong to me-e-e-e...
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Reggy View Post
@ Fat Tails

Thanks for the good info and your rapid response. Sorry bout the delay in response, but I finally found something of interest to post.

25wins and 1 small loss all day July15 on EURUSD. I know I must be missing something.

The general idea, that all the MA's should be in confluence, comes from Nick Kanger won the Olympic Bronze medal for Forex trading in 2008. Out of over 50,000 North American Forex Traders entered in the FX SOLUTIONS OLYMPIAN FOREX TRADING CONTEST, ProAct Traders LLC Vice President Nick Kanger took the Bronze medal. The contest ran from August 10th through the 25th matching the athletic competition in Beijing. Mr. Kanger took the bronze medal with a 116.2% increase in his equity account in just 15 days.


Bullish Entry: (opposite for bearish )
1. 8hull ma hooks up
and
2. 8hull ma > 55hull ma
and
3. 55hull ma hooks up
and
4. confluence with candlestick
support/ resistance

Bullish Scale-in, Scale-out:
1. 144hull ma confluence
2. 377hull ma confluence

Bullish Exit:
1. 8hull ma hooks down

The 4hull system is just for setups, and I intend to manage entry, exit, and risk/reward on 165t, 55t charts with momentum.

I hope somebody finds this useful, or can steer us in the right direction.

Thanks and All The Best,
Reggy

Good work Reggy,
What do you use for input ? Last
Can you define confluance?
Thanks

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Last Updated on July 21, 2011


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