Author: Andrey N. Bolkonsky
If you're diving into technical analysis, you might want to check out the Moving Averages Convergence/Divergence (MACD) Indicator by William Blau. This tool is detailed in his book, Momentum, Direction, and Divergence: Applying the Latest Momentum Indicators for Technical Analysis.
The MACD Indicator is calculated by subtracting two exponentially smoothed moving averages (EMA). The fast EMA has a period of s, while the slow EMA uses a period of r.
The value of the MACD shows the relationship between the fast s-period EMA and the slow r-period EMA. When EMA(s) is greater than EMA(r), the MACD is positive. If EMA(s) is less than EMA(r), it’s negative. A rising MACD indicates divergence between the moving averages, while a falling MACD suggests they are converging.
- Place WilliamBlau.mqh in terminal_data_folder\MQL5\Include\
- Place Blau_SM_Stochastic.mq5 in terminal_data_folder\MQL5\Indicators\
Moving Averages Convergence/Divergence by William Blau.
Calculation:
The MACD is calculated using the following formula:
macd(price,r,s) = EMA(price,s) - EMA(price,r)
s < r
Where:
- price - the closing price of the current period;
- EMA(price,r) - the slow EMA based on period r;
- EMA(price,s) - the fast EMA based on period s.
William Blau’s formula for MACD looks like this:
MACD(price,r,s,u) = EMA( macd(price,r,s) ,u) = EMA( EMA(price,s)-EMA(price,r) ,u)
s < r
Where:
- price - the closing price;
- EMA(price,r) - first smoothing using the slow EMA;
- EMA(price,s) - second smoothing using the fast EMA;
- macd(r,s)=EMA(price,s)-EMA(price,r) - the convergence/divergence of the moving averages;
- EMA(macd(r,s),u) - third smoothing applied to the MACD.
- r - period of the first EMA (slow), default is r=20;
- s - period of the second EMA (fast), default is s=5;
- u - period of the third EMA applied to the MACD, default is u=3;
- AppliedPrice - type of price, default is AppliedPrice=PRICE_CLOSE.
- r>1, s>1;
- s<r (according to William Blau, no checks are implemented in the code);
- u>0. If u=1, no smoothing is applied;
- Minimum rates =([max(r,s)]+u-2+1).
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