How a Double-Smoothed MACD Stochastic Oscillator Is Calculated

Summary

This indicator combines a MACD calculation with two stochastic normalization stages and exponential smoothing. It first computes MACD as the difference between fast and slow exponential moving averages of the selected price. That value is scaled within its recent high-low range, then smoothed; a second rolling range normalization and smoothing stage produces the double-smoothed stochastic output. A signal line is then smoothed from that output.

The indicator exposes eight adjustable settings: stochastic, smoothing, and signal periods; fast and slow EMA periods; applied price; and overbought and oversold levels. The document supplies the calculation equations and parameter relationships, but no chart examples, trading rules, or backtest evidence. It therefore explains how the oscillator is constructed without showing whether its readings predict returns or how the threshold levels should be chosen.

Key ideas

• The oscillator begins with the difference between fast and slow exponential moving averages.
• It applies stochastic normalization and smoothing twice to the MACD series.
• A separate smoothed signal line is calculated from the final oscillator output.
• Its eight inputs include lookback periods, price selection, and overbought and oversold thresholds.
• The document describes the formula but gives no evidence of trading performance.

Tags

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