A standard MACD applies two exponential moving averages. The Multiple MACD offers a selection of 30 different moving averages as input series. This indicator furthermore comes with two separate trend definitions.
Indicator Description
The Multiple MACD standard trend definition checks whether the MACD is above or below the zeroline. A second trend definition also requires confirmation from current price action. Applying the indicator to a MACD strategy, you may then select the fast/slow moving averages and the signal type from over 30 different moving averages.
Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator. The MACD shows the relationship between two Exponential Moving Averages (EMA) by subtracting a 26-period EMA from a 12-period EMA resulting in the MACD line. The 9 period EMA is referred to as the Signal Line.
MACD crossovers and divergences
Two common approaches for applying the indicator in a MACD strategy is to look for signal line crossovers and divergence with price action. You may consider buy setups when the MACD crosses above the signal line. Conversely, short setups occur when the MACD crosses below the signal line. As for locating divergence setups. This occurs when the MACD forms a new high / low, diverging from the corresponding price action high / low.
A bullish MACD strategy divergence setup will form when two rising lows correspond with two falling price action lows. However, this scenario should be accompanied by a long-term trend bullish bias. Opposite, a bearish MACD strategy divergence setup will form when two rising highs correspond with two rising price action highs. Again, the scenario should be accompanied by a long-term trend bias (bearish).
You may call the MACD trend definition in a trading strategy with both Bloodhound from Shark Indicators and the NinjaTrader Strategy Builder.
MACD trading strategy approaches
The Multiple MACD is best used when aligned with a higher timeframe trend / momentum bias. For a few suggestions on how to do that, please review our Indicator Spotlights on the TDI indicator and the Regression Channel. The Regression Channel is available here.
You may further increase the probability of successful trades by “buying support and selling resistance”. For more information, please review our session tools category. For example, the the Fibonacci Levels derived from the current day highs and lows, alternatively the Fibs from the prior N Months.
Finally, in our Indicator Spotlight on the Z-score we discussed how to create a fixed scale for the Awesome Oscillator. Specifically, the post discussed how the Z-score can be used to create a fixed scale for an Awesome Oscillator strategy. You may achieve the same for the MACD. This is particularly useful if you want to create testable entry and exit conditions for trading systems.
Other Library Indicators
Other than the Advanced Oscillators category, our library include a standard Momentum Oscillators category, featuring among others the Acceleration Deceleration, Awesome Oscillator, Fast Stochastics, LBR 3/10 Oscillator, Know Sure Thing, the Double Smoothed Momentum Index, the Stochastics Momentum Index and a new and improved version of the RSI. Furthermore, other Multiple Series Indicators include the Multiple Moving Average Wave, the Multiple TSI and the Multiple Keltner Channels indicators. Finally, other library indicators applicable to a MACD strategy include the MACD BB Lines, the MACD KC Lines and the Gapless MACD.
The Ichimoku Kinko Hyo, discussed in our Indicator Spotlight, also has certain similarities with the MACD.
The indicator is available for NinjaTrader 8.
