Theory:
The MACD, or Moving Average Convergence Divergence, is a well-known indicator in the trading world. It’s calculated by taking the difference between the fast and slow Exponential Moving Averages (EMA). This particular version of MACD allows you to:
- Choose from one of four fundamental types of averages for your calculations:
- Simple Moving Average (SMA)
- Exponential Moving Average (EMA)
- Smoothed Moving Average (SMMA)
- Linear Weighted Moving Average (LWMA)
- Normalize those MACD values to a range of -1 to +1, making it easier to interpret signals.
Usage:
One handy feature of the Normalized MACD is its color changes, which can serve as trading signals. Pay attention to these shifts, as they can indicate potential entry or exit points in the market.
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