MACD-V Normalizes Momentum by Average True Range

Summary

MACD-V modifies the classic MACD by scaling the difference between short and long exponential moving averages by the asset’s average true range, then multiplying by 100. The resulting momentum reading is designed to be more comparable across time and markets than an unscaled EMA difference. A signal line is formed as an exponential average of the normalized series, and their difference gives the histogram.

The note describes reference levels for interpreting the MACD-V line: attention zones around positive and negative 50 and excess zones around positive and negative 150. It also adds positive and negative 40 levels for histogram attention. The source points to an IFTA study with examples across indices, bonds, and commodities, but provides no performance results or validation details itself. Thresholds depend on the exponential-average periods, so the cited levels may not apply unchanged when those settings differ.

Key ideas

• MACD-V divides the short-minus-long EMA difference by ATR and multiplies it by 100.
• The normalized line is intended to make momentum readings more comparable across assets and time periods.
• An EMA of the MACD-V line serves as its signal line, and the line-minus-signal difference forms the histogram.
• The note uses positive and negative 50 and 150 as attention and excess reference levels, with 40 and negative 40 for histogram attention.
• Interpretation thresholds vary when the exponential-average periods change.

Tags

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