Hello friends! Please forgive me if this is a silly question or is in the incorrect place. Also, bear in mind, I am relatively new to forex trading. I noticed recently that the history of the MACD changes over time... As in, gives a different reading to what it indicated 20mins ago for example. Is this normal? I thought I had noticed it change before but put it in the back of my mind because I was holding other information in my head at the time. Then it happened again... I found this to be quite odd as during my studying I have seen people drawing lines over their MACD as some sort of analysis (I don't do this). I did try to come up with explanations for the changes. One such explanation being that perhaps the MACD read out zoomed out and gave the impression of the history changing but this is not the case. I noticed tiny bars on the histogram disappear... And bigger histogram bars reduce in size. Sorry if this is a stupid question but I'd really like to understand the MACD correctly. And this phenomenon is preventing me from trusting it as an indicator. How can I back test using the macd as an indicator if what I am using has probably changed from what it was initially indicating? Thanks in advance folks!
Not certain what you are asking but the MACD measures the relationship of two moving averages over time...hence the convergance/divergance. It will change as price changes.
It's values should never change. It's calculated off previous "X number" of bars closes. If for some reason previous bars values are being changed,updated or corrected the calculations will change. Sure your not just seeing the scale of the macd changing on the chart and not it's actual values.
I'm not sure what's happening, Sir. All I know is bars on the MACD histogram change from what it initially records. At least visually... Perhaps there's some sort of a scale shift. An example: I'm using the MACD on a 1hr forex chart. Looking back a few short hours the histogram has some sort of bell curve shape or whatever... After that comes a tiny bar and then a slightly bigger one... What I have observed is that tiny bar disappearing and the slightly bigger one being reduced to the size of the one that just disappeared. If everything is changing in scale then that's OK, but seeing the MACD's records change in front of my eyes is off putting when it comes to using it during back testing.
Back in the 1990s there were charting packages that as new data came in, it would changes like what was 10:00am right now, and three hours later the value was totally different. Perhaps are you updating your data in some way or turning off the charting and it backfills? There can change values. Which forex dealer or brokerage are you experiencing this? But the better dealers and or data providers, this seldom ever happens.
The way how you describe it gives me the impression that the vertical axis of the chart gets scaled. This could be caused if the most recent bar, which is currently developing, is spiking up. The vertical axis then expands ("zooms out") which gives the impression that all movements in the past seem smaller in amplitude.
Maybe if you provided screenshots before and after, it would be easier to see what you're talking about? The latest bar may update intrabar (ie. by realtime data), which causes latest MACD value and other indicators to also update based on new information. So latest bar may change continuously, causing latest MACD bar to change as well as causing scaling changes. Some trade software allows you to freeze scaling, thus the view should be independent on new data. If historical data truly changes, it could mean you get updates to historical data somehow as well. Most areas of trading are off-putting. There's problems in all areas that need to be overcome by the truly determined souls. In this game, nothing is ever totally free or easy, but it's still worth it to strive for cheap and non-complicated at least, though no guarantee of success.
Thank you very much for the replies. I will take a before and after picture later on today and post it. I'll be the first to admit that I'm not the sharpest tool in the box. So maybe this is a rookie misunderstanding with how scaling works but for it to show some level of momentum registered on the histogram one minute and then to show an absence of that momentum (isn't that what the histogram indicates?- momentum) at that particular time later on is weird to me. Anyway I'll post a picture later on. Ps: Oanda is my broker and it's their own charts that do this
This bug is caused by a failure to properly initialize the formula and permitting it to begin plotting before the result attains a stable state. I could further describe the exact cause and precise solution for this enigma but I already did that and deleted it 3 days ago --- prior to seeing the "wind up" announcement proclaiming a likelihood this thread was being deliberately manipulated for nefarious purposes. I deleted my earlier reply due to the following facts. 1) Troll's generally target Technical Analysis topics. 2) ET's history and reputation as a troll welcoming forum. supporting documentation quoted below.