Grimes Modified MACD + Highest / Lowest Momentum Indicator

The Grimes Modified MACD + Highest / Lowest Momentum Indicator tool provides a modified version of the standard Moving Average Convergence Divergence (MACD) that utilizes Simple Moving Averages (SMAs) and dynamic momentum bands to help traders compare current momentum strength against historical extremes.

Usage

The indicator can be used to identify trend direction, momentum shifts, and overextended market conditions. Unlike the traditional MACD which uses Exponential Moving Averages (EMAs), this script uses SMAs for a different smoothing effect.

The main components of the indicator include:

• MACD & Signal Lines: Used for identifying trend crossovers. When the MACD line crosses above the Signal line, it suggests bullish momentum; a cross below suggests bearish momentum.
• Highest/Lowest Bands: These lines represent the smoothed highest and lowest MACD values over a user-defined period. They act as dynamic overbought and oversold thresholds.
• Momentum Extremes: When the MACD line moves beyond the Higher or Lower bands, the area is highlighted. This indicates that current momentum is stronger than the recent average peaks or troughs, signaling a potential trend acceleration or an exhaustion point.

Details

This script refines the standard MACD calculation by replacing the EMA with an SMA for both the fast and slow components. The core innovation is the inclusion of the "Higher" and "Lower" bands. These are calculated by taking the Simple Moving Average of the highest and lowest MACD values over a specific lookback period. This smoothing of the extremes provides a more stable reference point for momentum comparison than raw peak values.

Settings

• Fast Length: The period for the fast Simple Moving Average.
• Slow Length: The period for the slow Simple Moving Average.
• Signal Length: The period for the signal line SMA.
• Highest Length: The lookback period used to determine the highest momentum peaks.
• Lowest Length: The lookback period used to determine the lowest momentum troughs.

FAQ

How do I use the Highest and Lowest bands?

The bands act as a gauge for relative momentum. If the MACD line breaks above the Highest band, it shows that the current upward move is stronger than recent history. Conversely, breaking below the Lowest band shows significant downward pressure.

What is the difference between this and a standard MACD?

This version uses Simple Moving Averages (SMA) instead of Exponential Moving Averages (EMA) and replaces the traditional histogram with dynamic bands that track momentum extremes.

How can I access the Grimes Modified MACD + Highest / Lowest Momentum Indicator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.