MACD-V

The MACD-V indicator provides a volatility-normalized version of the standard Moving Average Convergence Divergence to allow for better momentum comparison across different assets and timeframes. By standardizing the calculation using Average True Range (ATR), traders can identify overbought and oversold conditions with fixed thresholds that remain consistent regardless of price action intensity.

Usage

The MACD-V is primarily used to analyze normalized trends and identify potential exhaustion points in the market.

• Overbought/Oversold Levels: Unlike the standard MACD, which has no fixed boundaries, the MACD-V uses levels of 150 and -150. Readings above 150 suggest overbought conditions, while readings below -150 suggest oversold conditions.
• Trend Changes: Crossovers between the MACD Line (blue) and the Signal Line (red) indicate potential shifts in momentum. A crossover above the Signal Line suggests bullish momentum, while a crossunder suggests bearish momentum.
• Histogram Analysis: The histogram measures the distance between the MACD Line and the Signal Line, providing a visual representation of momentum acceleration or deceleration.

Details

Standard MACD values are dependent on the price of the asset, making it difficult to compare the momentum of a high-priced stock versus a low-priced one. MACD-V solves this by dividing the difference between the fast and slow EMAs by the ATR.

The formula used is:

• MACD Line: ((EMA(Fast) - EMA(Slow)) / ATR(Length)) * 100
• Signal Line: EMA(MACD Line, Signal Smoothing)
• Histogram: MACD Line - Signal Line

This implementation is based on the work of Alex Spiroglou CMT, who introduced the concept to provide a more robust momentum oscillator for technical analysis.

Settings

Indicator Settings

• MACD Fast Length: The period for the shorter exponential moving average (default is 12).
• MACD Slow Length: The period for the longer exponential moving average (default is 26).
• Source: The price data used for the calculation (default is Close).
• Signal Line Smoothing Length: The period used to smooth the MACD Line to create the Signal Line (default is 9).
• ATR Length: The period for the volatility normalization. It is recommended to keep this the same as the Slow Length.
• Overbought Bounds: The upper threshold for exhaustion (default is 150).
• Oversold Bounds: The lower threshold for exhaustion (default is -150).

Color Settings

• MACD Line: Color of the main MACD oscillator.
• Signal Line: Color of the smoothed signal line.
• Histogram: Various colors to represent growing or falling momentum above and below the zero line.

FAQ

How do I interpret the 150/-150 levels in MACD-V?

These levels represent standard thresholds where the trend is considered stretched. In a normalized environment, reaching these bounds suggests that momentum is at an extreme relative to recent volatility.

Why is ATR included in the formula?

The ATR (Average True Range) acts as a normalizer. By dividing the price difference by volatility, the resulting value is a percentage-like score that can be compared across different tickers.

How can I access MACD-V?

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