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This is ExitPoints's version of the MACD (Moving Average Divergence Convergence) indicator. The MACD has been widely used for decades by financial analysts as a momentum indicator. This version has been normalized to expand the analysis characteristics of the indicator. Since the pattern of the MACD is preserved and only the scale has been normalized, a trader can use all the pattern recognition usage built in to the MACD such as trend changes and reversals. The indicator can be used effectively with any chart time M1-MN).
Default Indicator Parameters:
- Fast EMA = 12
- Slow EMA = 26
- Smoothing or Signal Value = 9
- Overbought Line = 0.5
- Oversold Line = -0.5
ExitPoints uses this indicator in its trading systems. The default overbought and oversold lines are representative of the default parameter settings above. These are the number of bars to be used in the calculation of the MACD. If you change the calculation parameters it is recommended that you change the overbought and oversold line values to correspond to the new EMA values.
Since the scale has been normalized across all markets the indicator can be used to identify other characteristics such as when a market is overbought or oversold as well as the development of trade rules that will work across all markets and/or financial securities.
Note this is an indicator and not a trading strategy, It should probably not be relied on by itself to identify trade opportunities but rather be used in conjunction with any other of your favorite indicators to identify trading opportunities.