about MACD Histogram divergence

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  • #45495
    Ho
    • Topics: 1
    • Replies: 0
    • Posts: 1

    Hi. 

    I want to code MACD Histogram divergence like Dr. Alexander Elder in his book(Two Roads Diverged: Trading Divergences). 

    Here’s the definition of a bullish divergence: “It occurs when prices trace a bottom, rally, and then sink to a new low. At the same time, MACD-Histogram traces a different pattern. When it rallies from its first bottom, that rally lifts it above the zero line, ‘breaking the back of the bear.’ When prices sink to a new low, MACD-Histogram declines to a shallower bottom. At that point, prices are lower, but the bottom of MACD-Histogram is higher, showing that bears are weaker and the downtrend is ready for a reversal. MACD-Histogram gives a buy signal when it ticks up from its second bottom”.

    and Bearish divergences: “It occur near market tops, where they identify dangerous cracks in seemingly happy uptrends. A bearish divergence occurs when prices rise to a new high, decline, then rise to a higher peak. MACD-Histogram gives the first sign of trouble when it breaks below its zero line during the decline from its first peak. When prices reach a higher high, MACD-Histogram rises to a much lower high. It shows that bulls are weaker, prices are rising simply out of inertia and are ready to reverse.”

    Thank you!

    #45543
    Darren
    • Topics: 66
    • Replies: 680
    • Posts: 746

    Thanks Ho. See this post on divergences based on RSI:

    https://forum.optuma.com/topic/how-to-calculate-positive-and-negative-divergences/

    You would need to change the RSI to MACD Histogram to calculate the pivot lows:

    M1 = MACD(BAR1=12, BAR2=26, OSC=9).Histogram;
    P1 = PIVOT(M1, MIN=7, TYPE=Low);
    V1 = VALUEWHEN(M1, P1 <> 0);
    Sig1 = V1 > V1[1];
    V2 = VALUEWHEN(Close(),
    P1 <> 0);
    Sig2 = V2 < V2[1];
    M1 < 0 and Sig1 and Sig2

    • This reply was modified 3 years ago by Mark Wass.
    #47607
    George
    • Topics: 3
    • Replies: 4
    • Posts: 7

    Hi, just picking up on this past post. I wish to use filter looking when MACD-H drops to lowest low of past 100 bars. Would I set MIN=100 in the P1 Pivot?

    Also, how can I add a filter on this script to omit stocks under certain volume (ie. 1,000,000 million shares traded in a day) and above a certain price (ie. price greater than $5)?

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