| Since
TradeStation's standard MACD indicators only use bar lengths
for EMA1, EMA2 and the signal line, we have designed the AlchemyMACD
Indicator which contains inputs that can be entered either
as bar lengths OR as smoothing factor percentages. This eliminates
the need for any conversion from smoothing factors to bar
lengths that would result in MACD's that never precisely match.
Additionally, with our AlchemyMACD Indicator, the moving average
types for the fast and slow moving averages of the MACD as well
as the MACD average can be specified, therefore these averages
are not limited to exponential averages as with the standard
TradeStation MACD. We offer 5 different types of moving
averages, a simple moving average, an exponential moving
average, a weighted moving average, a smoothed moving average
and a triangular moving average, to be selected separately for
the fast moving average of the MACD, the slow moving average of
the MACD as well as the MACD average.
The
Alchemy %Ds Hook Indicator uses a formula that is different
from TradeStation's standard DSlow calculation to optimally
work with divergence. It also points out hooks by changing
plot colors and it contains a user-defined input that sets
a minimum slope for a hook requirement.
The
Signal Line-%Ds Hook Divergence Indicators are made up of
the AlchemyPriceDivergence Indicator, the AlchemySignalLineDivergence
Indicator and the AlchemyDsHookDivergence Indicator. These
multiple divergence indicators pick the most significant reversal
points by combining the %Ds and the MACD Signal Line. These
unique indicators find all of the price pivots that only correlate
to %Ds hooks and MACD Signal Line peaks/valleys, therefore
filtering out any unnecessary noise. The indicators only mark
the price pivots that diverge with both oscillators. By confirming
the divergence with %Ds AND the MACD Signal Line, the reliability
for a price reversal is greatly increased. The indicators
mark the divergence points on %Ds, price and the MACD signal
line in magenta and they color the previous pivot points that
are associated with the divergence pivot on %Ds, price and
the MACD Signal Line in yellow. This makes it very easy to
quickly identify all of the corresponding pivots. The AlchemyDsHookDivergence
Indicator colors all of the hooks that are associated with
any divergence pivots.
What
is divergence?
Divergence occurs when %Ds and the MACD Signal Line is giving
you an indication as to direction that is different from the
direction that price is moving. For example, price is heading
higher and the indicators are heading lower. Divergence occurs
when the higher price is not confirmed by a higher indicator
reading.
Types
of divergence:
Bullish
Divergence - occurs when price is making a lower low
and the indicator is making a higher low, failing to move
to a new low with price. This is a great sign of a potential
bottom and many traders look deeper for confirmation of a
buy signal when bullish divergence occurs. Often times, you
will see bullish divergence correspond with the low of the
day.
Bearish
Divergence - occurs when price is making a higher
high and the indicator is making a lower high, failing to
move to a new high with price. This is a great sign of a potential
top and many traders look deeper for confirmation of a sell
signal when bearish divergence occurs. Often times, you will
see bearish divergence correspond with the high of the day.
Bullish
and bearish divergence is a great tool for the intra-day trader.
However, spotting actual divergence with price and the indicator
can be a very tedious and inconsistent task for most traders.
With the Alchemy Divergence Indicators all the difficult and
tedious measuring are done for you in a very visual and consistent
manner. This allows the trader to concentrate on possible
trade set-ups and trade confirmation signals.
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