Mirrored MACD

The Mirrored MACD indicator provides a unique perspective on momentum by calculating the difference between the Exponential Moving Average (EMA) of open and close prices, creating a symmetrical oscillator for trend identification.

Usage

The Usage of the Mirrored MACD is centered around the interaction between the mirrored histograms and the zero line or signal line.

• Trend Identification: The current market state is generally determined by which histogram is above the zero line. A bullish state exists when the green histogram (BullHisto) is dominant, while a bearish state exists when the red histogram (BearHisto) is dominant.
• Entry Confirmation: Traders often look for the histogram to cross above the signal line for added confirmation of a trend shift.
• Exits: Crossing below the signal line or the zero line can be interpreted as a potential exit condition for a position.
• Divergences: Like the traditional MACD, users can look for divergences between price action and the Mirrored MACD peaks/troughs to identify weakening momentum.

Details

Unlike the standard MACD which calculates the convergence and divergence between two different EMA periods of the close price (e.g., 12 and 26), the Mirrored MACD focuses on the relationship between the EMA of the "Close" and the EMA of the "Open" using a single length.

By calculating EMA(close) - EMA(open) and its inverse EMA(open) - EMA(close), the indicator creates a "mirrored" visual effect. This approach aims to capture the intraday or intra-bar momentum shifts more effectively than standard price-lagging oscillators. The signal line is then derived using a Simple Moving Average (SMA) of the primary oscillator line.

Settings

• Length: The lookback period for the Exponential Moving Averages (EMA) applied to the open and close prices.
• Signal Length: The period for the Simple Moving Average (SMA) used to calculate the signal line.
• Color bars?: A toggle to enable or disable chart bar coloring based on the bullish or bearish state of the indicator relative to the signal line.

FAQ

How do I interpret the mirrored histograms?

The green histogram represents the positive difference between the EMA of the close and open, while the red histogram represents the inverse. When the green histogram is above the zero line and the signal line, it suggests bullish momentum.

Can I use this for divergence trading?

Yes, the Mirrored MACD is well-suited for identifying bullish and bearish divergences when price makes a new extreme but the oscillator fails to do so.

How can I access the Mirrored MACD?

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