Good MACD

GoodMACD is a VertexFX client side VTL indicator which is an enhancement of the MACD indicator by employing additional smoothing (alpha and beta), to reduce lag and improve the response of the regular MACD.

Good MACD comprises of three components, the main MACD (blue) and the secondary Signal (red) component. The third component is the Histogram (GREEN) which is the difference between the MACD and the Signal components. The main MACD indicator is calculated by subtracting the slow moving EMA (SLOW_MA_PERIOD) from the fast moving EMA (FAST_MA_PERIOD), based upon the closing price.The Signal line is calculated by smoothing the MACD component with ALPHA (which is 2 divided by, SIGNAL_MA_PERIOD plus 1, and BETA, which is one minus ALPHA). The Signal value is equal to ALPHA multiplied by current MACD plus BETA multiplied by previous value of Signal. The ALPHA and BETA smoothing improves the responsiveness of the MACD indicator and reduces the lag. It tends to identify the change in market conditions faster than the regular MACD. In an uptrend, the Histogram (GREEN) used to move upwards.

When trend saturates, histogram tops out and starts falling. When downtrend saturates and bottoms out, again Histogram moves sideways and then starts moving upwards. Like the MACD, GoodMACD indicator also oscillates around the 0 line which shows the change in trend direction.

BUY – Place Buy position when Blue line closes above Red line from below. Both Blue and Red lines must be below zero.