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I have need to plot a weekly MACD on a
daily chart. Can this histogram formula be modified to do this or does
anyone know where I could get that formula? I have tried to figure out
something that would do it but it appears to be a lot more complicated than one
would think.
TIA
Bill
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
<A title=no_reply@xxxxxxxxxxxxxxx
href="">pumrysh
To: <A
title=equismetastock@xxxxxxxxxxxxxxx
href="">equismetastock@xxxxxxxxxxxxxxx
Sent: Tuesday, March 30, 2004 7:12
PM
Subject: Re: [EquisMetaStock Group]
Weekly MACD histogram
Roy,As always words of wisdom. Appears to be a good
chapter for the book.Preston--- In <A
href="">equismetastock@xxxxxxxxxxxxxxx,
"Roy Larsen" <rlarsen@x...>
wrote:> Hi Alan> > > Thanks for your excellent
advice. As a newbie, it's difficult for me> > to know what to
believe and what not to believe on the internet.> > That's why I
wish I could analyse any formula that I find - such as> > the
weekly MACD in my post.> > > I found the weekly MACD
histogram formula at:> > <A
href="">http://www.paritech.com/education/technical/custom/indicators/macd.asp>
>> > I have already posted your reply on their Metastock forum,
so> > hopefully they will remove their formula from their site, or
at least> > try to justify it.> > That will be
interesting. I don't really want to get into an argument with Paritech but
when I> plotted the formulas you posted the weekly one was so far off
it was a joke> > > There's a fiendishly complicated
formula for weekly MACD at:> >
www.users.bigpond.com/prominex/MetaStock/Roy-63.txt> > This is
my formula :-) , hence the name "Roy"> Yes it does look feindishly
complicated but quite a bit of the formula has to do with making>
allowances for things that can be wrong with the data so that it will
exactly emulate the MetaStock> MACD values as plotted on a weekly
chart. Try plotting my formula on a weekly chart and then plot> the
MS drop-down indicator over the top of it. There will possibly be some
differences at the left> side of the chart but values should agree
to 4 decimal places at the right unless you only have a>
small amount of history.> > My weekly formulas attempt to create
exact weekly data from the daily chart and are very accurate in>
doing so. Most attempts at weekly data emulation are done on a "near
enough is good enough" basis> but in my view that's not good enough.
When you have thinly traded issues, suspensions,> reconstructions,
Easter or Christmas breaks, and various other situations that cause gaps
in the> data, great care has to be taken to ensure that the right days
are included in the right weeks.> > I could create simpler
weekly indicators but for some issues they would be less accurate.
Unless> they are accurate 100% of the time how do you know when they
will be off? The thing with a weekly> formula (for daily charts) is
that it must plot the same values that you would see for the
standard> MS formula on a weekly periodicy chart. That's the only
standard it can be judged by as far as I'm> concerned.>
> I can take you through a complete weekly formula and explain every
detail if you wish. It would take> you a while to absorb but you
would learn quite a lot.> > > I suspect that the Paritech
formula is trying to calculate MACD for> > Friday's closing
prices only. I verified this by plotting all the> > individual bits
and pieces as separate indicators, because I'm too> > inexperienced
to understand the formula. (If you know anyone who> >
understands the bit between the {start} and {end}, could you ask
them> > to explain it. It doesn't matter whether they
agree with it or not.> > At least I'll learn something.)>
> I could do this but my thinking is your time and mine would be
better spent on studying something> that has underlying principles
that give accurate results. I didn't attempt to study the Paritech>
code (I may have if I'd known where it came from) but I plotted it
alongside code I knew to be> accurate. It was so far off I didn't
see any reason to investigate further.> > > I suppose it
makes some sense: the> > daily MACD formula is based on daily
closing prices, so the weekly> > MACD formula is based on Friday's
closing prices. Presumably, if> > there were a monthly MACD
histogram, it would be based on monthly> > closing prices.>
> Exactly right. I could knock up a monthly MACD and it would only
use the CLOSE for each month, just> as MetaStock would on a monthly
periodicy chart. The plot that doesn't change for several bars may>
look a little odd but when you think about it, it can't be any other way
if it is a true> representation. A weekly MACD doesn't change value on
Wenesday then again on Friday.> > > I agree with your
comment that the Paritech daily MACD is "slightly> > off".
I found this description of the daily MACD histogram in a book>
> by someone called Dr. Alexander Elder (why do all conmen and
shysters> > call themselves "Dr"):> > I don't know
that I'd call Dr Elder a conman. He is widely respected in the trading
industry and is> the author of a couple of "must have" books.>
> The reason why the Paritech MACD is slightly off is because they
are using the convventional 12/26> "periods" to create the two
exponential moving averages. This is widely accepted as normal so in
one> sense these are "more" accurate than the MS version. You need to
understand how an EMA is> constructed to understand why these
differences show up.> > An EMA adds a proportion of new data for
evey bar, and it also retains a portion of old data> (previous
value). If the proportion of new data added is 20% then the proportion of
old data> retained is 80%. Can you see that? A standard EMA calculates
the amount of new data to add like> this - 2/(1+periods). The
actual construction of an EMA follows so that you can check the code
for> yourself.> > {Exponential Moving
Average}> n:=Input("Periods",1,999,10);> R:=2/(n+1); {ratio of
new data added each bar}> M:=If(Cum(1)=1,C,PREV*(1-R)+C*R);>
M;> > So the factor determining how much new data to add and how
much old data to retain for a 12 period> and 26 period EMA is 2/13
and 2/27 respectively. In decimal terms this is 0.153846 and
0.074074.> Metastock actually uses values of 0.15 and 0.075 rather than
basing on 12 and 26 periods, and that's> why the MetaStock MACD is
slightly of the Paritech code.> > > Page 129:> >
1. Calculate the 12-day and 26-day exponential moving averages
of> > closing prices.> > 2. Subtract the 26-day EMA
from the 12-day EMA to obtain the fast> > MACD line.> >
3. Calculate a 9-day EMA of the fast MACD line to obtain the
slow> > Signal line. Plot both lines to obtain the classic MACD
indicator.> > 4. Subtract the Signal line from the MACD line
to obtain an MACD-> > Histogram.> > This is the
accepted norm but I think may be only only a close approximation of what
the creator> intended. I honestly don't know which is the "authentic"
version. At the end of the day they're only> numbers that we
interpret how we want. Anyway I have no argument with the there being two
different> versions because I understand the slightly different values
that each version is based on.> > > The "MetaStock canned
version", as you call it, is bound to be> > superior, because at
least I've heard of Equis :-), but I've never> > heard of Dr.
Alexander Elder.> > You have now :-) Don't write him off.
There are many "experts" out there but just take what you can> use
and leave the rest. My comment in my earlier reply "If this works for you
then great, but a> weekly MACD it is not." applies across the board. If
anything is suspect as to name or accuracy but> still works for you
then don't throw it away, just make sure you understand the differences.
At the> end of the day you have to use what works for you, not what
some guru tells you works for everyone> else.> > >
Thanks for your help.> > No problem. Remember that a fair bit of
the above comments are my opinions only, and may not be> shared by
others.> > I meant what I said about being willing to walk you
through any of my code if you want to learn.> > Good
luck.> > Regards> > Roy
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