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Using Probability-Density Moving Averages in a MACD Indicator

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Summary

This indicator replaces the moving averages in a conventional MACD with probability-density-function moving averages. The document characterizes the PdfMA as a weighted moving average whose weights come from a probability density function, and notes its similarity to digital filters. Both the MACD components and the signal line use PdfMA, while the display is designed to resemble the standard indicator so users can compare them more easily. The suggested use is the same as for an ordinary MACD.

The stated comparison shows the regular MACD alongside the PdfMA version at default settings and with variance set to three. The text says that increasing variance produces a smoother indicator that remains faster than the regular MACD, and suggests experimenting with variance to seek cleaner signals. This is a visual comparison only: no formula details, defined signal rules, quantified results, backtest, asset class, or transaction costs are provided. Smoother or faster indicator lines do not by themselves demonstrate more reliable trades.

Key ideas

  • PdfMA calculates moving-average weights using a probability density function.
  • The indicator uses PdfMA for both the MACD calculation and its signal line.
  • Its layout is intended to support comparison with a conventional MACD.
  • The document reports that higher variance makes the displayed indicator smoother while remaining faster than regular MACD.
  • The comparison is visual and does not establish trading performance.

Tags

Technical indicatorsStatisticsBacktesting

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