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1991issue C031-12

Regime-gated MACD and stochastic rules inside a checklist

A checklist-process can first apply an adx-regime-gate, then use macd or a stochastic-oscillator according to the assigned confidence-factor. The inference-engine stops when an action-level fact is added to the knowledge-base.

  • Write the checklist-process as heuristic if-then rules that fire only when their conditions are already in the knowledge-base, then add a new fact rather than claim certainty.
  • An 18-period adx-regime-gate marks a trending or non-trending state, after which macd is the stronger signal in a trend and a nine-period slow stochastic-oscillator is the complementary oscillator when the market is not trending.
  • When several unused rules are eligible, conflict-resolution prefers the higher confidence-factor and the inference-engine stops at the first action-level fact.
  • Obtain each confidence-factor by testing an indicator separately in different market environments and recording its win/loss ratio, rather than assuming one weight fits every regime.
Entries in this reading3 entries
Pre-trade checklist43 readingsCurrent trackMACD115 readingsStochastic oscillator170 readings

Write the checklist as if-then facts

A trading-systems-decision-process is a repeatable sequence that turns market observations into an explicit entry, exit, or stand-aside decision. This combination uses a checklist-process: a written set of if-then gates that must be satisfied, in order, before a trade is taken or refused.

The checklist can be written as heuristic if-then rules. A rule fires only when its stated conditions are already in the knowledge-base, the inventory of current facts the checklist is allowed to consult. The rule then adds a new fact. It does not claim certainty.

Let the inference-engine pick one unused rule

The inference-engine scans eligible unused rules, prefers the unused rule with the higher attached reliability weight when more than one can fire, and stops once an action-level fact is obtained. That choice among several eligible rules is conflict-resolution. The attached reliability weight is the confidence-factor on the rule.

Forward-chaining starts from observed facts and works toward an action. Backward-chaining starts from a hypothesized action and asks whether the supporting facts can be established.

Classify regime before an indicator adds an action

An 18-period ADX reading is used as an adx-regime-gate. A reading above 15 that is at least as high as two days earlier marks a trending state. A reading below 30 that is no higher than two days earlier marks a non-trending state. The adx-regime-gate is used only to decide whether the market is treated as trending or non-trending.

MACD is treated as the stronger signal in a trending regime and the weaker signal in a non-trending regime. Complementary reliability weights are assigned to a nine-period slow stochastic-oscillator.

MACD buy and sell hypotheses are defined as the MACD line crossing above or below its signal line. The MACD line is the difference of two exponentially smoothed averages. The signal line is a further smoothing of that difference.

In a non-trending regime the nine-period slow stochastic-oscillator is used as an overbought or oversold oscillator. %K is taken from a nine-period window, and both %K and %D are further smoothed over three periods.

The stochastic buy rule requires both SK and SD below 30, with SK below SD, then SK crossing above SD next period. The sell rule requires both SK and SD above 70, with SK above SD, then SK remaining above SD next period.

Change the knowledge-base when market character changes

Rule reliability weights are obtained by testing an indicator separately in different market environments and recording its win/loss ratio. One confidence-factor is not assumed to fit every regime.

A constructed checklist can switch among different knowledge bases when market character changes, including the rate of change of the trend. It can combine technical readings with other indicator classes in one procedure.

MACD line and signal line versus Dow Jones Industrial Average

The MACD line and its signal line move through late 1989 into mid-1990, then lift with the late-1990 rally while the lower pane tracks the Dow. Values were read off the published Figure 3 plot, not from a table.
The MACD line and its signal line move through late 1989 into mid-1990, then lift with the late-1990 rally while the lower pane tracks the Dow. Values were read off the published Figure 3 plot, not from a table.Dow Jones Industrial Average · daily · 1989-11-01T00:00:00.000Z to 1990-07-31T00:00:00.000Z

Source uses exponential constants 0.15 and 0.075 for the MACD line and 0.2 for the signal line. Digitized from a low-resolution inverted scan; y-values are approximate and should not be treated as exact prints.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
4 of 80 in the MACD track
19911-3 pp.Next on MACDConstructing MACD signal lines and divergence testsThe MACD line is the arithmetic difference between two exponential moving averages of successive closing prices.
All readings on this track · 80 readings
  1. 1988Rebuild MACD-Mo and MACD-H before treating them as signals
  2. 1989Four-span MACD lookbacks as perishable parameters
  3. 1989Weekly then daily MACD confirmation on individual stocks
  4. 1991Regime-gated MACD and stochastic rules inside a checklist
  5. 1991Constructing MACD signal lines and divergence tests
  6. 1991MACD parameter order and cycle phase lag
  7. 1992Lengthened bond MACD as an equity regime filter
  8. 1992Long-horizon MACD construction from paired exponential averages
  9. 1993Constructing a signed ten-point trend filter
  10. 1994Constructing lag-reduced double exponential averages for MACD
  11. 1994Seeding DEMA2 filters to build a MACD signal
  12. 1994Constructing MACD from lag-reduced exponential averages
  13. 1994TEMA1 from nested exponential averages, then a two-horizon MACD
  14. 1994Constructing entry and exit on a relative-strength MACD
  15. 1994Constructing a relative-strength MACD crossover spreadsheet
  16. 1995Consensus presignal filters for Relative Strength Index, MACD and the Stochastic oscillator
  17. 1997Confirm the MACD turn with price, then exit on the histogram
  18. 1997Reconstructing a stochastic oscillator, MACD, and a triple-smoothed oscillator
  19. 1997Moving-average windows before crossovers and MACD
  20. 1999Second-stage MACD on relative-strength inputs
  21. 1999Constructing MACD from exponential-average spreads for crossover and divergence
  22. 1999Coding candlesticks into numeric indicators
  23. 2001Second-low confirmation with a percentage oscillator and money-flow filter
  24. 2001Constructing MACD from exponential average spreads and a signal line
  25. 2002Separate bounded and trend-following oscillator rules
  26. 2002Sort the regime before assigning MACD and stochastic jobs
  27. 2002Building classic divergence filters from RSI and MACD
  28. 2002Weekly highs and lows as trend gates
  29. 2002Constructing channel-normalized Fisher reversal signals
  30. 2002Affine-price and the Fisher transform as a constructed companion to MACD
  31. 2003Regularized EMA construction with a MACD line and a thrust oscillator
  32. 2003Curvature-penalized exponential averages versus MACD
  33. 2003MACD, moving averages, and a trend filter as one timing system
  34. 2003Fractional MACD and linear-regression reversal construction
  35. 2004Weekly MACD-histogram timing of bear-market rallies
  36. 2004Candlestick triggers filtered by MACD divergence
  37. 2004Staging energy-complex tops with trendline, breakout, and MACD
  38. 2005Selling climax holds versus fails
  39. 2006Treat a sideways Wave as permission before a breakout
  40. 2007MACD with a Stochastic oscillator for spotting trend reversals
  41. 2007Rebuilding an S&P 500 fifth-wave count after a broken target
  42. 2007Constructing MACD, RSI, and stochastic confirmation for futures
  43. 2007MACD histogram divergence needs a confirming close
  44. 2007Write the plan as a stack: ratio, boundary, then oscillators
  45. 2008MACD divergence and Stochastic oscillator confirmation on lumber futures
  46. 2008Assign confirmation, timing, and a stop before a currency pair is tested
  47. 2008Confirm the ten-bagger launch path before the MACD exit
  48. 2008Reading the offloaded evidence file
  49. 2008A Leader companion for MACD direction warnings
  50. 2008Relative strength exits with MACD averages and RSI
  51. 2008Assign one job per indicator in a three-screens rule set
  52. 2008Sequencing RSI, MACD, and average crossovers
  53. 2010Constructing the Schaff Trend Cycle from MACD and a dominant-cycle window
  54. 2010Schaff Trend Cycle as a MACD and Stochastic oscillator combination
  55. 2010Combining Relative Strength Index, the stochastic oscillator, and MACD as slope filters
  56. 2010Short-term wave and ratio clues without direction calls
  57. 2010A precise pullback entry and an unplanned profit-protection exit
  58. 2010Filtering MACD false signals with trendline breaks
  59. 2011Vendor feeds as an input variable in a MACD evaluation
  60. 2012Out-of-the-money versus in-the-money option sensitivity to implied volatility
  61. 2012MACD window tuning as hold-time control
  62. 2012Combining a moving-average crossover with MACD and support-resistance
  63. 2012Testing a published MACD entry with a histogram and signal-line agreement filter
  64. 2012Treat sample systems as a lab before live rules
  65. 2013Constructing moving averages and MACD from one price series
  66. 2013The next-bar price that forces a MACD signal-line cross
  67. 2013Constructing next-bar MACD reversal prices
  68. 2013Constructing inverted MACD reversal prices
  69. 2014Shared-filter combinations of the stochastic oscillator, MACD, and RSI
  70. 2014Square-root lookbacks for combined MACD and RSI
  71. 2015Audit open interest and trend before trusting oscillator crossovers
  72. 2016MACD without a signal line, confirmed by moving-average trend filters
  73. 2016Use RSI, MACD, and a moving average as a market-health consensus
  74. 2016MACD line versus histogram is a display problem first
  75. 2017Weekly and daily MACD on a single daily chart
  76. 2017Weekly and daily MACD as a stacked momentum filter
  77. 2017Nested weekly and daily MACD from paired EMA spreads
  78. 2018Weekly and daily PPO scale versus MACD, with bounded RSI and stochastic readings
  79. 2018Constructing a weekly and daily percentage price oscillator
  80. 2020Constructing Wyckoff tape reading with MACD, moving-average, and RSI filters
By fieldDecision process69 readingsBy year199198 readings
All 115 readings tagged MACD
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