Normalized MACD (v420)

The Normalized MACD (v420) indicator is a momentum-based oscillator that applies a normalization process to a Hull Moving Average-derived MACD to provide clearer trend signals and overbought/oversold indications.

Usage

The Normalized MACD (v420) is used to identify trend direction and potential reversal points. Traders can look for crossovers between the normalized MACD line and the trigger line to signal entries or exits.

• Crossovers: When the normalized line crosses above the trigger line, it indicates bullish momentum. Conversely, crossing below signals bearish momentum.
• Normalization: By scaling the output between -1 and 1, the indicator allows for a more consistent comparison across different assets and timeframes.
• Visual Cues: The indicator includes optional histograms and fills that change color based on the current momentum state, aiding in rapid trend identification.

Details

This script deviates from the traditional MACD by utilizing the Hull Moving Average (HMA) as its foundation. The HMA is known for reducing lag while maintaining smoothness. The resulting difference between HMA values is then normalized using a lookback period (Normalize length), which calculates the current value relative to its highest high and lowest low over that period. This ensures the oscillator remains within a fixed range, making it easier to spot extreme conditions compared to a standard MACD.

Settings

• Source: Determines the price data used for calculations (e.g., OHLC4).
• HullMA cross: Sets the length for the underlying Hull Moving Average calculation.
• Trigger: Defines the smoothing length for the trigger line (WMA).
• Normalize: Specifies the lookback period used to scale the oscillator between -1 and 1.
• Histogram: Toggles the visibility of the momentum histogram.
• Fill: Enables or disables the background fill between the MACD and trigger lines.
• Color Change: Toggles the dynamic color updates for trend visualization.

FAQ

How do I use the Normalized MACD (v420)?

You look for the relationship between the normalized line and the trigger line; crossovers often signal shifts in trend momentum, while the normalization helps identify when the trend is reaching an extreme.

What is the advantage of using a Hull Moving Average in this MACD?

The Hull Moving Average significantly reduces the lag found in traditional exponential moving averages, allowing the MACD to respond faster to price changes without adding excessive noise.

How can I access the Normalized MACD (v420)?

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