This is a variation of MACD popularised by Linda Bradford Raschke. Instead of the regular MACD settings, the this indicator uses simple moving averages, not exponential moving averages, and a setting of 3 for the fast MA, 10 for the slow MA and 16 for the signal line.
The signal line (red) acts as a trend indicator, with crossings of the zero line indicating trend changes, while the MACD line (blue) acts as a short term momentum indicator.
Setups: - First cross: This is basically selling or buying at the first pullback after a trend change. Buy or sell after the signal line has crossed the zero line and the MACD crosses the signal line for the first time after the trend change. Use price action to time the entry after the pullback — you don't need to wait for the MACD to cross the signal line again. - Pullback in a trend: The MACD crosses the signal line in the opposite direction of the trend irregardless of when the trend change occurred. Use price action to time the entry. - Divergence: The MACD line shows a pattern diverging form price (e.g. makes higher lows whereas price makes lower lows). This can be an indication of trend reversal or waning.
In the indicator's input panel there is an option for showing standard deviation bands (turned off by default). MACD line crossing the standard deviation bands can indicate oversold and overbought conditions.
The indicator comes with the following alerts: - First cross downtrend - First cross uptrend - Pullback in downtrend - Pullback in uptrend - Trend change down - Trend change up
Correction: The description of First Cross is not quite right. It occurs after the MACD line crosses below the zero line the first time after the signal line has crossed above the zero line.
sebbipanza
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Hi maybe a little late to the party but Do you know if its possible to combine this indicator with a 2 ROC ? I see Linda uses that allot.
bonfireAlgorithm
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@sebbipanza, sure you could, but I can't remember seeing her using that combo. Both ROC and the LBR indicator shows momentum, so imo that would be a little redundant.
firstsucsess
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i mean, do scanner for any stock wit this scrip?
firstsucsess
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good job, any option to scan with this algorithm ?
ctannous2134
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The new formula would be: " [EMA(3,C) – EMA(10,C) ] / ATR(10)"
ajaybabu7885
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Awesome. can you please make this oscillator as Histogram also, it can be very easy to see momentum changes in one look.
bonfireAlgorithm
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@ajaybabu7885, you can achieve that yourself: Click on the settings icon for the indicator, then Style. To the right of MACD you will see a line icon, you kan change it to e.g. histogram or column. You can also save these settings as default at the bottom of the settings panel (where it says Defaults).
ajaybabu7885
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@bonfireAlgorithm, Thanks for the time. When I made changes it's only displaying Histogram, and disappear 3-10 line. I want to replicate as Linda's 3-10-16 oscillator model. That will show histogram as well as 3-10 line moving along with Histogram changes. I tried to make changes in the script but it's giving "undefined error" in the script.
bonfireAlgorithm
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@ajaybabu7885, hm, not sure I understand. My instructions would make the blue line (the fast line) into a histogram, but you want to show both the line and a histogram? If you have some link to the indicator you describe, please provide it and I can take a look at it.