When running MACD, it can be useful to compare the value of the MA difference to other values. In other words, is a particular stock or futures contract at a more extreme MACD value than another. This can be done by dividing by the price, however, that doesn't adjust for volatility differences. Using ATR, one can adjust for price and volatility at the same time, allowing comparisons between securities more easily.
I created the same thing on TC2000, before using TV. This can do more than compare securities.
Use it to identify a new trend or evaluate strength of a trend. Wait for the ATR adjusted line to go way over a minimum value like 0.25 or 0.30. Wait for a pull back, but the Line stays above 0.25 when the security pops back up. This is where you're most likely to find a rewarding trend continuation. A MACD is useless for this because it's just the difference between the lines. The PPO is a ratio, but it has different values for different time frames. Further, both are auto scaled (for good reasons), but that makes it impossible to use the line distance from center to visually determine trend strength.
This ATR adjustment is much more useful because the ATR value is normalized to the timeframe! This indicator needs no tweaking or adjustments when switching timeframes or securities.
If you make enhancements, can you add user defined lines? I'm going to go into the script and add two lines for myself, +/- 25.
Thank you.
bayesianman
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some kind of ppo?
fxfool
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@dean1983, Yes, essentially. While the plot might look like PPO (and even MACD), the numbers will be different and (hopefully) comparable across a products which have low volatility (like 6E) and high volatility (like BTC). That way, you can make decisions based on numbers and not just visual movement of the indicator.