Discussion in 'Technical Analysis' started by gifropan, Dec 1, 2010.

  1. Can MACD be adapted to be used as a trend indicator. It seems sometimes the turn in the MACD coincides very accurately with turns in the market but it always gives a few false signals before. Any ideas on more effective uses of MACD.
  2. MACD is moving averages. For trend following you need slower MAs. Why do you want to adapt MACD?

    Anyway,systems with MACD backtest losers. Especially when you trade in the short term you need to take advantage of information in price, not smooth it. Once I read someone calling MACD and related techniques "wealth transfer mechanisms".
  3. jprad


    Most oscillators like the MACD, CCI, RSI and Stochastics to name a few, will indicate trend based on the location of indicator relative to it's midpoint line and the indicators direction.

    If it's above the midpoint the general trend is up. If the indicator is rising the trend is also rising. If the indicator is falling while still above the midpoint it's a pullback within the current trend.

    The reverse applies for down trends below the midpoint.

    However, oscillators often fail due to the fact that they are bandpass filters and, as such, get swamped when a stronger and out-of-phase cycle is present.