Grimes Modified MACD Supply Demand

The Grimes Modified MACD Supply Demand indicator is a technical analysis tool that utilizes a modified MACD calculation to identify and plot potential supply and demand zones directly on the price chart. By analyzing momentum extremes relative to historical averages, it highlights areas where significant price reversals or continuations are likely to occur.

Usage

The Usage section focuses on how the indicator identifies key market interest areas based on momentum shifts. Users can look for the shaded zones formed when the modified MACD reaches significant high or low thresholds.

• Supply Zones: Formed when the MACD exceeds the calculated upper threshold and begins to turn downwards, suggesting a potential exhaustion of bullish momentum and the presence of supply.
• Demand Zones: Formed when the MACD drops below the calculated lower threshold and begins to turn upwards, suggesting a potential exhaustion of bearish momentum and the presence of demand.
• Trend Confirmation: These zones can act as support or resistance levels. A breakout above a supply zone or below a demand zone may indicate a strong trend continuation, while price rejection at these zones can signal a reversal.

Details

The script functions by calculating a fast and slow Simple Moving Average (SMA) to derive a MACD line. Unlike standard MACD implementations, this tool tracks the highest and lowest MACD values over a specific lookback period to establish dynamic thresholds.

A "Supply" or "Demand" condition is met when the current MACD value crosses these smoothed extrema. The script specifically looks for instances where the MACD is "stretched" (beyond the threshold SMA) and then shows a change in direction. When these conditions are met, the high and low of the corresponding price bar are used to anchor the supply/demand zones.

Settings

MACD Parameters

• Fast: The length for the fast SMA calculation (default: 3).
• Slow: The length for the slow SMA calculation (default: 10).
• Signal: The length for the signal line SMA (default: 16).

Threshold Parameters

• Highest MACD Reading Within N Bars: The lookback period used to determine the highest momentum peaks.
• Lowest MACD Reading Within N Bars: The lookback period used to determine the lowest momentum troughs.
• MACD Threshold SMA Length: The smoothing length applied to the extreme MACD values to create the final trigger thresholds.

FAQ

How do I interpret the zones?

The zones represent areas of historical momentum exhaustion. A blue zone appearing at a price peak typically suggests supply, while a zone at a price trough suggests demand.

Can I use this for scalping?

Yes, by adjusting the Fast and Slow lengths to smaller values, the indicator becomes more sensitive to short-term momentum changes, making it suitable for lower timeframe analysis.

How can I access the Grimes Modified MACD Supply Demand?

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