_i_MACD
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This custom tool is designed to provide traders with a visual representation of market momentum by calculating the relationship between two different price averages. It simplifies complex price movements into three distinct visual elements that help identify potential trends and shifts in market sentiment.
How the Logic Works
The script operates through a three-step calculation process to generate its visual output:
1. Momentum Calculation (The MACD Line) First, the tool looks at the asset's closing prices over two different timeframes simultaneously. It calculates a "Fast" average and a "Slow" average. By subtracting the slow average from the fast average, the script determines the momentum of the market. If the fast average is significantly higher than the slow average, it suggests upward momentum; if it is lower, it suggests downward momentum. This difference is plotted as the primary line on your chart.
2. The Signal Smoothing (The Signal Line) To make the data easier to interpret, the tool takes that "Momentum" result and performs a second calculation. It creates a moving average of the momentum itself. This acts as a "Signal" line, smoothing out minor price fluctuations to help traders identify the overall direction of the trend without being distracted by "noise" or small, erratic price jumps.
3. The Variance Gap (The Histogram) Finally, the script calculates the mathematical distance between the Momentum Line and the Signal Line. This difference is displayed as a histogram at the bottom of the indicator window.
- When the histogram bars are large, it indicates a significant gap between current momentum and the average trend.
- When the bars shrink or cross toward zero, it suggests that the momentum is stabilizing or potentially reversing.
Summary of Visual Components
- MACD Line: Shows the immediate difference between fast and slow price trends.
- Signal Line: Provides a smoothed path to help identify long-term direction.
- Histogram: Visually highlights the distance between the two lines, making it easier to spot where momentum is accelerating or slowing down.
/*-----------------------------+
| |
| Shared by www.Aptrafx.com |
| |
+------------------------------*/
//+------------------------------------------------------------------+
//| Custom MACD.mq4 |
//| Copyright © 2004, MetaQuotes Software Corp. |
//| http://www.metaquotes.net/ |
//+------------------------------------------------------------------+
#property copyright "Copyright © 2005, Doji Starr"
//---- indicator settings
#property indicator_separate_window
#property indicator_buffers 3
#property indicator_color1 Indigo
#property indicator_color2 Red
#property indicator_color3 Silver
//---- indicator parameters
extern int FastEMA=12;
extern int SlowEMA=26;
extern int SignalSMA=9;
//---- indicator buffers
double ind_buffer1[];
double ind_buffer2[];
double ind_buffer3[];
//+------------------------------------------------------------------+
//| Custom indicator initialization function |
//+------------------------------------------------------------------+
int init()
{
//---- drawing settings
SetIndexStyle(0,DRAW_LINE,STYLE_SOLID,2);
SetIndexStyle(2,DRAW_HISTOGRAM,STYLE_SOLID,3);
SetIndexDrawBegin(1,SignalSMA);
IndicatorDigits(MarketInfo(Symbol(),MODE_DIGITS)+1);
//---- indicator buffers mapping
if(!SetIndexBuffer(0,ind_buffer1) && !SetIndexBuffer(1,ind_buffer2) && !SetIndexBuffer(2,ind_buffer3))
Print("cannot set indicator buffers!");
//---- name for DataWindow and indicator subwindow label
IndicatorShortName("_i_MACD("+FastEMA+","+SlowEMA+","+SignalSMA+")");
SetIndexLabel(0,"MACD");
SetIndexLabel(1,"Signal");
SetIndexLabel(2,"Histogram");
//---- initialization done
return(0);
}
//+------------------------------------------------------------------+
//| Moving Averages Convergence/Divergence |
//+------------------------------------------------------------------+
int start()
{
int limit;
int counted_bars=IndicatorCounted();
//---- check for possible errors
if(counted_bars<0) return(-1);
//---- last counted bar will be recounted
if(counted_bars>0) counted_bars--;
limit=Bars-counted_bars;
//---- macd counted in the 1-st buffer
for(int i=0; i<limit; i++)
ind_buffer1[i]=iMA(NULL,0,FastEMA,0,MODE_EMA,PRICE_CLOSE,i)-iMA(NULL,0,SlowEMA,0,MODE_EMA,PRICE_CLOSE,i);
//---- signal line counted in the 2-nd buffer
for(i=0; i<limit; i++)
ind_buffer2[i]=iMAOnArray(ind_buffer1,Bars,SignalSMA,0,MODE_SMA,i);
//---- difference counted in the 3-rd buffer
for(i=0; i<limit; i++)
ind_buffer3[i]=ind_buffer1[i]-ind_buffer2[i];
//---- done
return(0);
}
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