Normalized MACD (v420) strategy

The Normalized MACD (v420) strategy indicator is a trend-following momentum tool that utilizes Hull Moving Averages and normalization techniques to identify market entries and exits with reduced lag. By normalizing the oscillator values, the script aims to provide a more consistent scale for interpreting momentum shifts across different market conditions.

Usage

The Normalized MACD (v420) strategy can be used to identify potential trend reversals and continuation patterns. Long positions are typically initiated when the trigger line is below zero and the normalized MACD value crosses above it, suggesting a bullish momentum shift. Conversely, short positions are considered when the trigger is above zero and the normalized value crosses below it.

The strategy includes built-in trade management features, including a stop loss and target point defined in monetary value. Users can monitor the relationship between the "teh" (smoothed momentum) and the Trigger line to gauge the strength of the current trend.

Details

This script departs from the traditional MACD construction by replacing standard Exponential Moving Averages (EMA) with Hull Moving Averages (HMA). The HMA is known for its ability to reduce lag while maintaining significant smoothing.

The calculation process involves:

1. Calculating the difference between two HMA periods.
2. Normalizing the resulting "Mac" value over a user-defined lookback period to fit within a specific range (typically -1 to 1).
3. Applying a Weighted Moving Average (WMA) to this normalized value to create a signal or "Trigger" line.
4. Implementing strategy logic that considers both momentum direction and profit/loss thresholds.

Settings

Main Settings

• Source: Determines the price data used for the calculations (default is OHLC4).
• HullMA cross: Adjusts the length of the Hull Moving Average used in the core calculation.
• Trigger: Sets the smoothing period for the signal line (WMA).
• Normalize: Defines the lookback window used to calculate the highest and lowest values for normalization.
• Stop Loss in $: Sets the hard stop loss value in currency units.
• Target Point in $: Sets the take profit value in currency units.

FAQ

How do I use the Normalized MACD (v420) strategy?

You can apply it to your chart to see automated long and short entry signals based on normalized momentum crossovers, while managing risk through the integrated stop loss and take profit settings.

What makes this different from a standard MACD?

This version uses Hull Moving Averages instead of EMAs to reduce lag and includes a normalization algorithm to ensure the oscillator fluctuates within a consistent range regardless of price volatility.

Where can I access this script?

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