MACD Divergence +

The MACD Divergence + indicator provides a comprehensive toolkit for identifying momentum shifts and potential trend reversals through standard and advanced MACD analysis. This tool combines traditional MACD calculations with the specialized "Top Dog Trading" MOM and DAD methodologies, offering users a versatile approach to technical analysis with built-in divergence detection.

Usage

This script is primarily used to identify divergences between price action and momentum. Users can leverage several key features:

• Divergence Detection: Automatically plots regular and hidden divergences on the MACD Histogram and MACD Line. Regular divergences suggest potential trend reversals, while hidden divergences often indicate trend continuation.
• Top Dog Trading Mode: By enabling the MOM and DAD version, the indicator shifts to a specialized calculation using different lengths (typically 5, 20, 30) to identify momentum (MOM) and trend direction (DAD).
• Visual Aids: The histogram and MACD lines change color based on slope and position relative to the zero line. The background can also be shaded to highlight bullish or bearish market environments based on signal line direction or histogram crossovers.
• Alerts: Users can set up notifications for divergence occurrences and crossovers to avoid constant screen monitoring.

Details

The indicator calculates the difference between two Moving Averages (Fast and Slow) to create the MACD line, which is then smoothed by a Signal line.

• Standard MACD: Typically uses 12, 26, and 9 periods.
• Top Dog Trading (MOM/DAD): MOM refers to the MACD line, while DAD refers to the Signal line. This methodology focuses on the relationship between these two components to determine market cycles.
• Fractal-Based Divergences: The script uses a 5-bar fractal method to identify local peaks and valleys in the oscillator, comparing them to price peaks/valleys to confirm divergences.

Settings

General Settings

• Top Dog Trading MOM and DAD Version: Switches the indicator logic from standard MACD to the Top Dog Trading parameters.
• Top Dog Trading - Histogram of MOM: Toggles the display of the histogram when in Top Dog mode.
• Standard MACD Inputs: Adjust the Fast Length (12), Slow Length (26), and Signal Smoothing (9).
• Top Dog Trading Inputs: Adjust the Fast Length (5), Slow Length (20), and Signal Smoothing (30).
• Simple MA: Toggles between Exponential Moving Averages (default) and Simple Moving Averages for calculations.

Visuals & Divergences

• Directional Color Changing: Enables color shifts on the MACD line based on its current slope.
• Shade Background: Enables background coloring based on Histogram or DAD direction.
• Divergences Offset: Adjusts the plot position of divergence markers to reflect a more realistic entry point or the exact peak.
• Regular/Hidden Divergences: Separate toggles for Bullish/Bearish regular and hidden divergences for both the Histogram and the MACD Line.

FAQ

How do I access MACD Divergence +? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

What is the difference between "Regular" and "Hidden" divergences? Regular divergences indicate a possible trend reversal, whereas hidden divergences typically suggest that the current trend is likely to continue after a retracement.

What are MOM and DAD in this context? In the Top Dog Trading methodology included in this tool, MOM represents the MACD line (Momentum) and DAD represents the Signal line (the "parent" or trend direction).