Mon. Jun 17th, 2024

Understanding Normalized MACD on tradingview

The Normalized MACD (Moving Average Convergence Divergence) is a popular technical analysis indicator used by traders on the TradingView platform. This article aims to provide a beginner’s guide to understanding and using the Normalized MACD indicator effectively.

What is the Normalized MACD?

The Normalized MACD is a variation of the traditional MACD indicator that helps traders identify potential trends and momentum in the market. It is represented by two lines – the MACD line and the signal line – and a histogram.

The MACD line is derived from the difference between two moving averages, typically the 12-day and 26-day exponential moving averages (EMA). The signal line, often a 9-day EMA, is an additional line plotted on top of the MACD line.

The histogram represents the difference between the MACD line and the signal line. When the histogram is positive, it indicates bullish momentum, while a negative histogram suggests bearish momentum.

How to Use the Normalized MACD on TradingView

To apply the Normalized MACD on TradingView, follow these steps:

1. Open the TradingView platform and select the desired chart.
2. Click on the “Indicators” button and search for “Normalized MACD” in the search bar.
3. Once found, click on the indicator and configure the settings according to your preferences.
4. By default, the Normalized MACD comes with predefined values for the fast and slow length parameters. However, you can customize these values based on your trading strategy.
5. After configuring the settings, the Normalized MACD will be plotted on the chart.

Interpreting the Normalized MACD

The Normalized MACD provides traders with signals based on the interactions between the MACD line, the signal line, and the histogram. Here are some common interpretations:

  • When the MACD line crosses above the signal line, it generates a bullish signal. Traders may consider buying or holding a long position.
  • Conversely, when the MACD line crosses below the signal line, it generates a bearish signal. Traders may consider selling or holding a short position.
  • Increasing histogram bars indicate strengthening momentum in the identified direction, while decreasing bars suggest weakening momentum.
  • Divergences between the price and the Normalized MACD can also provide valuable insights. Bullish divergence occurs when the price makes lower lows while the MACD makes higher lows, indicating potential trend reversal to the upside. Conversely, bearish divergence occurs when the price makes higher highs while the MACD makes lower highs, suggesting a potential trend reversal to the downside.

It is important to note that the Normalized MACD, like any other technical indicator, should not be used in isolation. Traders should consider using other tools and analysis techniques to confirm the signals generated by the Normalized MACD.

In Conclusion

The Normalized MACD is a powerful tool that can assist traders in identifying potential trends and momentum in the market. By understanding its components and interpreting its signals, traders can make more informed trading decisions on the TradingView platform. Remember to combine the Normalized MACD with other technical analysis tools for a well-rounded trading strategy.

By admin