A Smoothed MACD Normalized to Its Recent Range

Summary

This indicator transforms the MACD into a bounded measure by scaling its current value against the highest and lowest MACD readings over a rolling normalization window. It then applies smoothing to the normalized series and calculates a signal line from that smoothed value. The display colors the main line according to whether it is rising or falling and colors the signal line according to its relationship with the main line. The example uses conventional MACD periods along with separate smoothing and normalization windows.

The normalization is intended to make the MACD easier to read on a consistent scale, while smoothing reduces visual fluctuation at the cost of some lag. If the rolling high and low are equal, the calculation assigns a neutral value. The document provides an implementation but no trading rules, chart examples, empirical comparisons, or evidence that normalization improves returns. Its signals therefore require independent testing, and the chosen lookback and smoothing settings may affect responsiveness and interpretation.

Key ideas

• The indicator rescales MACD using its rolling high and low to place readings within a bounded range.
• A smoothing step is applied to the normalized MACD, and a separate smoothed signal line is computed.
• Line colors reflect the main line’s direction and the signal line’s position relative to it.
• Smoothing can reduce visual noise while introducing lag.
• The document supplies implementation details but no trading results or validation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.