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Reverse Engineering MACD
Description
The Reverse Engineering MACD study is a trend following indicator based on analysis of MACD changes. This study consists of two main plots: PMACDeq and PMACDlevel.
PMACDeq plot represents price of the current bar at which its MACD value would be equal to the previous one. PMACDlevel plot represents price of the current bar at which its MACD value would be equal to the specified one.
These two plots are accompanied with an auxiliary plot showing averaged values of PMACDeq. Note that the type of average is the same as the specified for MACD calculation.
Input Parameters
Parameter Descriptionprice The price for which MACD is calculated.fast length The number of bars used to calculate the fast moving average.slow length The number of bars used to calculate the slow moving average.macd length The number of bars used to calculate the moving average of MACD.average type The type of moving average to be used in calculations.macd level MACD value used in PMACDlevel calculation.
Plots
Plot DescriptionPMACDeq The PMACDeq plot.PMACDlevel The PMACDlevel plot.MA_PMACDeq Moving average of PMACDeq.
Further Reading
1. "Reversing MACD" by Johnny Dough. Technical Analysis of Stocks & Commodities, January 2012.