bcrafty, just a few thoughts on the MACD issue:
Alan Farley, (author of The Master Swing Trader), recommends a variety of combinations -- both of MACD as well as of other indicators -- depending on the holding period of the trade, (which also determines the periodicity of the charts to use).
Here's a thumbnail, in case anybody is interested.
1. Daily, weekly, and monthly charts:
8-17-9 MACD for buy signals
12-26-9 MACD for sell signals
20 day Bollinger Bands
14 day smoothed RSI (or, if smoothed RSI not available, 14-7-3 full stochastic)
Volume w/60 day MA
On Balance Volume
2. 60 minute charts
8-17-9 MACD for buy signals
12-26-9 MACD for sell signals
(both with histogram)
13-2 bollinger bands
8 & 5 simple moving averages
5-3-3 stochastic
3. 5 minute charts (I KNOW -- WIGGLES!)
8-13-8 MACD histogram (I think histogram only)
13-2 bar BB
8&5 SMA
5-3-3 Stochastic
4. For day trades of 1-3 hours
6-17-9 MACD on 60 min chart
5-3-3 Stochastic on five minute chart
8-2 BB on one minute chart
A couple tips passed on to me by Eddieww, (another SI poster).
1. For day trades, he uses 5 bar Exponential and 8 bar Simple Moving Averages together -- swears they give they best crossover signal. (This was discovered on an old SI thread the name of which I cannot recall at the moment.)
2. He also likes the ULT, (ultimate oscillator), in place of the more commonly used RSi. Says it often leads price by multiple bars on intraday charts. (He uses the standard 7-14-28 settings.)
A couple things I have played with.
1. I've started using the PPO, (percentage price oscillator), in place of the MACD. They both do much the same thing, and look very much alike, as this chart shows: stockcharts.com
The difference lies in how they are calculated. The MACD is calculated by subtracting the longer EMA from the shorter, and then using a third EMA as a trigger line. (For the standard 12-26-9, you would subtract the 26 EMA from the 12 EMA, then use the 9 EMA as the trigger.) The point is that the main line of the MACD plots the absolute difference between the two EMAs. stockcharts.com
The PPO, on the other hand, is calculated "by subtracting the longer moving average from the shorter moving average and then dividing the result by the shorter moving average." Thus, the main line of the PPO plots "the difference between the two moving averages as a percentage of the shorter moving average." stockcharts.com
So what, you ask?
So, it means that you can compare changes in PPO levels from one issue to another, which you cannot do with the MACD. For example, you could look at the 12-26-9 PPO of BKX and compare its movement to the 12-26-9 PPO of the SPX, to see if one is leading the other, are they diverging, etc.
In addition, you can look at the PPO on a given issue from one time period, (for example, the top of the bubble), and compare it to the PPO from another time period, (for example Friday's close), and they will be comparable, even if the issue has lost 95% of its value. By way of contrast, comparing the MACD of, say, QCOM at the height of the bubble vs the MACD of QCOM today would be meaningless.
HTH,
augie |
