Volume-Normalized Price Momentum as a MACD Sentiment Oscillator

Summary

This indicator estimates market sentiment by dividing smoothed price changes by smoothed volume, then applying fast and slow exponential averages to that ratio. Their difference forms a MACD-like line, with a signal average and histogram. In the supplied strategy, a histogram cross above zero opens a long position and a cross below zero closes it; despite the discussion of bearish sentiment, the source does not open a short position.

The document presents volume normalization as a way to represent buying and selling pressure and describes histogram divergence as a possible reversal clue. It supplies configurable lookback and smoothing lengths, but offers no measured performance evidence. Volume can be noisy or inconsistent across instruments, and oscillator crosses or divergences may arrive late or produce false signals. The notes recommend testing settings by market and timeframe, adding risk controls and filters, and validating signals with price trends or related instruments.

Key ideas

• The indicator divides smoothed price change by smoothed volume to estimate sentiment.
• Fast and slow averages of sentiment create a MACD-style oscillator and histogram.
• The source buys on a positive histogram cross and closes the long on a negative cross.
• Histogram divergence is presented as a possible but uncertain reversal signal.
• The document gives no results and notes that parameters and risk controls need validation.

Tags

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