ProRealAlgos
Go to ProRealAlgos.com
Indicators/probuilder · probacktest · proorder · proscreener

MACD

MACD in ProBuilder returns the MACD histogram, the gap between the MACD line and its signal line, with standard 12/26/9 settings. Syntax and examples.

Syntax

probuilder
MACD[S, L, Si](price)

Parameters

NameTypeDefaultDescription
Sinteger12Period of the short exponential moving average.
Linteger26Period of the long exponential moving average. Must be larger than S.
Siinteger9Period of the exponential moving average applied to the MACD to form the signal line.
priceprice sourcecloseThe price series the calculation runs on. Commonly close, also accepts open, high, low, typicalprice, or a custom variable.

Formula

code
MACD line = EMA[S](price) - EMA[L](price)
Signal    = EMA[Si](MACD line)
MACD[S, L, Si](price) = MACD line - Signal   // the histogram

The result is unbounded and expressed in the instrument's price units. When the MACD line sits above its signal line the value is positive; when it sits below, the value is negative.

How it works

On every bar, ProBuilder computes the MACD line, the short EMA of price minus the long EMA, then smooths that line with an Si-period EMA to form the signal line. The MACD instruction returns the difference between the two, the series charting packages draw as the histogram. A crossing through zero therefore marks a signal-line crossover, not an EMA crossover.

The two component series are available as separate instructions: MACDLine returns the raw line and MACDsignal returns the signal line. MACDLine - MACDsignal reproduces the value returned by MACD.

MACD was designed by Gerald Appel as a trend-following momentum indicator. It combines two questions in one series: which side of the trend the short average is on, and how quickly the gap between the averages is changing.

Examples

Example 1, Rising MACD while price pulls back (Indicator)

probuilder
// MACD with the standard 12, 26, 9 settings on closing prices
i1 = MACD[12,26,9](close)
FOR i = 20 DOWNTO 0 DO
    IF(close[i] < close[i+1] AND i1 > i1[1]) THEN
        result = 100
    ELSE
        result = 0
    ENDIF
NEXT
RETURN result

Preserved from the source page. The condition pairs a falling close with a rising MACD. Note that each pass of the loop overwrites result, so the returned value reflects only the final iteration (i = 0), the current bar.

Example 2, Signal-line crossover strategy (ProOrder)

probuilder
// Go long when the histogram turns positive, exit when it turns negative
DEFPARAM CumulateOrders = false
m = MACD[12,26,9](close)

IF NOT LongOnMarket AND m CROSSES OVER 0 THEN
  BUY 1 CONTRACT AT MARKET
ENDIF
IF LongOnMarket AND m CROSSES UNDER 0 THEN
  SELL AT MARKET
ENDIF

Because MACD returns the histogram, a zero cross means the MACD line has crossed its signal line, the classic MACD entry trigger expressed in a single condition.

Example 3, Improving momentum below zero (ProScreener)

probuilder
// Instruments where a negative histogram has risen two bars in a row
hist = MACD[12,26,9](close)
improving = hist < 0 AND hist > hist[1] AND hist[1] > hist[2]
SCREENER[improving](hist AS "MACD hist")

Returns instruments still below the signal line but with a shrinking gap, a momentum-improvement scan that fires before the actual crossover.

Interpretation

SignalReading
Histogram above zeroMACD line above its signal line, upward momentum.
Histogram below zeroMACD line below its signal line, downward momentum.
Histogram crosses above zeroBullish signal-line crossover, a common trigger condition.
Histogram shrinking toward zeroMomentum fading ahead of a possible crossover.

For zero-line crossovers of the MACD line itself, the EMA crossover reading, test MACDLine against zero instead.

Divergences. A bullish divergence occurs when price prints a lower low while the MACD forms a higher low. A bearish divergence occurs when price prints a higher high while the MACD forms a lower high. Both are read as early signs of a possible reversal, and the DivergenceMACD instruction detects them directly.

Common errors and gotchas

  • Histogram, not line. MACD returns the histogram. Code ported from platforms where MACD() returns the line will misfire. Use MACDLine for the line and MACDsignal for the signal.
  • All three periods are required. MACD[12,26](close) raises a syntax error. The periods go in square brackets, the price source in parentheses: MACD[12,26,9](close).
  • Loop overwrite. In the source pattern from Example 1, the FOR loop assigns result on every iteration, so earlier bars are discarded. To count matches over 21 bars, accumulate into a counter instead of overwriting.
  • Not comparable across instruments. MACD is unbounded and scales with price. A reading of 2.5 on an index and 0.002 on a forex pair carry no relative meaning. Screeners ranking by raw MACD mix scales.
  • Lag in slow markets. Two nested EMAs make MACD a lagging measure. Crossovers arrive well after the turn on higher settings, and shortening the periods trades lag for whipsaws.
  • MACDLine, the MACD line as a standalone series.
  • MACDsignal, the signal line, an EMA of the MACD.
  • DivergenceMACD, built-in divergence detection.
  • ExponentialAverage, the EMA that MACD is built from.
  • PriceOscillator, percentage-based variant of the same idea.
  • Momentum, raw price change over N bars.
  • TRIX, triple-smoothed EMA rate of change.
  • Average, simple moving average for smoothing MACD output.