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Registered User
Joined: 4/10/2006
Posts: 3
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Hi,
I read a Worden report dated 5th Oct 06 that described the "Patient Trader" trading system. Wanting to backtest this system prior to trading it, I programmed it into Metastock. The trading system relies heavily on MACDs, but unfortunately I've so far been unable to replicate TC's MACD histogram accurately in Metastock. Referring to the Wikipedia link listed in the Worden Knowledge Base, the correct histograph formula for a Simple MACD(12,18,5) is as follows:
MACD = EMA12 - EMA18 on PRICE
SIGNAL = SMA5 on MACD
HISTOGRAM = MACD - SIGNAL
I've programmed this into Metastock as follows:
(Mov(CLOSE,12,E) - Mov(CLOSE,18,E)) {MACD} - (Mov((Mov(CLOSE,12,E) - Mov(CLOSE,18,E)),5,S)) {SIGNAL}
I've concluded that there must be a difference between the way in which TC calculates its MACD histogram and the way it was described on Wikipedia. Could you please shed some light as to how TC actually calculates its MACD histogram values, or perhaps point out something that I appear to have down incorrecly?
Much appreciated,
AvW
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Registered User
Joined: 1/28/2005
Posts: 6,049
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You may be interested in this:
Understanding MACD
MACD and MACD histogram equations are below the video.
Thanks
diceman
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Registered User
Joined: 1/28/2005
Posts: 6,049
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You may also be interested in this:
Indicator Color, Visuals, and MACD.
It shows how to indicate on price chart when MACD histogram is above and below zero (for back testing).
Thanks
diceman
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Worden Trainer
Joined: 10/7/2004
Posts: 65,138
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adriaanvw,
In TeleChart, a Simple MACD uses Simple Moving Averages throughout and an Exponential MACD uses Exponential Moving Averages throughout. It doesn't mix Simple and Exponential Moving Averages in the same MACD.
-Bruce
Personal Criteria Formulas
TC2000 Support Articles
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Registered User
Joined: 4/10/2006
Posts: 3
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Hi Bruce,
Thanks for the info. I've adjusted for what you pointed out, but still had differences. I then upgraded from TC2005 to TC2007, and now it all works! It would not have if you hadn't cleared up the non-mixing of MAs though.
Again, thanks for helping clear things up.
Adriaan
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Worden Trainer
Joined: 10/7/2004
Posts: 65,138
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You're welcome.
-Bruce
Personal Criteria Formulas
TC2000 Support Articles
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