OPEN-SOURCE SCRIPT
MACD with Normalisation [tordne]
The Moving Average Convergence Divergence (MACD) with Normalisation indicator is a modified version of the classic MACD, designed to provide a clearer and bounded interpretation of market trends and momentum. This indicator combines the power of MACD, signal lines, and a normalised range to help traders identify potential market reversals, overbought, and oversold conditions.
Key Features:
MACD and Signal Line: The MACD is calculated as the difference between a fast and a slow moving average of the price. Users can choose between two types of moving averages (Simple Moving Average (SMA) or Exponential Moving Average (EMA)) for both the fast and slow moving averages. The signal line is an average of the MACD itself, providing a reference point for identifying changes in market momentum.
Normalisation Between -2 and 2: Instead of plotting the traditional MACD histogram, this indicator features a normalised value that measures the difference between the MACD and the signal line. This value is scaled between -2 and 2, making it easy to interpret extreme market conditions. Positive values suggest a bullish momentum, while negative values indicate bearish momentum. The normalisation helps traders quickly assess whether the market is trending strongly or if conditions are stabilising.
Smoothing: To avoid noise and provide more reliable signals, the normalised value is smoothed using a simple moving average. This smoothed normalised value is plotted, making it easier to see consistent trends and avoid false signals.
Alerts for Overbought and Oversold Conditions: Alerts are available when the smoothed normalised value crosses certain thresholds. Specifically, alerts are triggered when the normalised value exceeds 2 or falls below -2. This helps traders identify potential overbought and oversold conditions, providing opportunities to consider taking profits or entering trades.
Plotting Details:
The MACD and Signal Line are both calculated and can be optionally displayed on the chart, though they are hidden by default to keep the chart cleaner.
The Smoothed Normalised Value is plotted prominently in purple, providing an easy-to-read visual of the current market state.
A Zero Line is plotted to serve as a reference point, helping traders quickly identify bullish or bearish conditions based on whether the smoothed normalised value is above or below zero.
How to Use This Indicator:
Trend Identification: The MACD and signal line are still effective tools for identifying the overall trend of the market. The smoothed normalised value provides a clear indication of the market state in a bounded range.
Overbought/Oversold Signals: Use the alerts to identify when the market may be overbought or oversold, based on the normalised value exceeding the +2 or -2 thresholds.
Momentum Changes: Crossovers between the MACD and signal line can still be used for identifying potential momentum changes. When the smoothed normalised value moves significantly, it suggests a shift in market dynamics.
This indicator is ideal for traders who want to simplify the interpretation of the classic MACD, providing a clear, bounded view of market momentum without the usual noise. By focusing on normalised values, it helps traders make faster, more informed decisions while maintaining the flexibility of the original MACD concept.
Key Features:
MACD and Signal Line: The MACD is calculated as the difference between a fast and a slow moving average of the price. Users can choose between two types of moving averages (Simple Moving Average (SMA) or Exponential Moving Average (EMA)) for both the fast and slow moving averages. The signal line is an average of the MACD itself, providing a reference point for identifying changes in market momentum.
Normalisation Between -2 and 2: Instead of plotting the traditional MACD histogram, this indicator features a normalised value that measures the difference between the MACD and the signal line. This value is scaled between -2 and 2, making it easy to interpret extreme market conditions. Positive values suggest a bullish momentum, while negative values indicate bearish momentum. The normalisation helps traders quickly assess whether the market is trending strongly or if conditions are stabilising.
Smoothing: To avoid noise and provide more reliable signals, the normalised value is smoothed using a simple moving average. This smoothed normalised value is plotted, making it easier to see consistent trends and avoid false signals.
Alerts for Overbought and Oversold Conditions: Alerts are available when the smoothed normalised value crosses certain thresholds. Specifically, alerts are triggered when the normalised value exceeds 2 or falls below -2. This helps traders identify potential overbought and oversold conditions, providing opportunities to consider taking profits or entering trades.
Plotting Details:
The MACD and Signal Line are both calculated and can be optionally displayed on the chart, though they are hidden by default to keep the chart cleaner.
The Smoothed Normalised Value is plotted prominently in purple, providing an easy-to-read visual of the current market state.
A Zero Line is plotted to serve as a reference point, helping traders quickly identify bullish or bearish conditions based on whether the smoothed normalised value is above or below zero.
How to Use This Indicator:
Trend Identification: The MACD and signal line are still effective tools for identifying the overall trend of the market. The smoothed normalised value provides a clear indication of the market state in a bounded range.
Overbought/Oversold Signals: Use the alerts to identify when the market may be overbought or oversold, based on the normalised value exceeding the +2 or -2 thresholds.
Momentum Changes: Crossovers between the MACD and signal line can still be used for identifying potential momentum changes. When the smoothed normalised value moves significantly, it suggests a shift in market dynamics.
This indicator is ideal for traders who want to simplify the interpretation of the classic MACD, providing a clear, bounded view of market momentum without the usual noise. By focusing on normalised values, it helps traders make faster, more informed decisions while maintaining the flexibility of the original MACD concept.
Script open-source
In pieno spirito TradingView, il creatore di questo script lo ha reso open-source, in modo che i trader possano esaminarlo e verificarne la funzionalità. Complimenti all'autore! Sebbene sia possibile utilizzarlo gratuitamente, ricorda che la ripubblicazione del codice è soggetta al nostro Regolamento.
Declinazione di responsabilità
Le informazioni ed i contenuti pubblicati non costituiscono in alcun modo una sollecitazione ad investire o ad operare nei mercati finanziari. Non sono inoltre fornite o supportate da TradingView. Maggiori dettagli nelle Condizioni d'uso.
Script open-source
In pieno spirito TradingView, il creatore di questo script lo ha reso open-source, in modo che i trader possano esaminarlo e verificarne la funzionalità. Complimenti all'autore! Sebbene sia possibile utilizzarlo gratuitamente, ricorda che la ripubblicazione del codice è soggetta al nostro Regolamento.
Declinazione di responsabilità
Le informazioni ed i contenuti pubblicati non costituiscono in alcun modo una sollecitazione ad investire o ad operare nei mercati finanziari. Non sono inoltre fornite o supportate da TradingView. Maggiori dettagli nelle Condizioni d'uso.