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2018issue C0246-54

Constructing a weekly and daily percentage price oscillator

This archive note shows how a weekly-and-daily percentage price oscillator is assembled from four exponential averages of one price series. Both the weekly component and the daily component use the weekly-slow average as their scale, and a combined plot adds the two percentage terms against a zero line.

  • The oscillator is built from four exponential averages of one price series: a weekly-fast and weekly-slow pair plus a daily-fast and daily-slow pair.
  • The weekly component and the daily component both divide by the weekly-slow average, so the two horizons share one scale.
  • A combined plot adds the daily component to the weekly component and draws a zero reference line.
  • The percentage construction is presented as better suited to comparing different securities, while the related MACD difference construction is presented as better suited to overbought and oversold readings on a single security.
Entries in this reading3 entries
Current trackMACD115 readingsExponential smoothing117 readingsMoving average449 readings

Four exponential averages

The weekly-and-daily percentage price oscillator is constructed from four exponential averages of the same price series: a weekly-fast and weekly-slow pair plus a daily-fast and daily-slow pair.

An exponential average is a recursively weighted average of successive prices that gives more weight to recent observations than a simple moving average of the same length.

One documented implementation uses default lengths of 60 and 130 for the weekly pair and 12 and 26 for the daily pair.

How the two percentage terms are scaled

A percentage price oscillator scales the gap between a faster and a slower exponential average as a percentage of the slower average rather than as a raw price difference.

The weekly component is the longer-horizon percentage term formed from the weekly-length exponential averages. It is 100 times the difference of the weekly-fast and weekly-slow averages divided by the weekly-slow average, and is set to zero when that denominator is zero.

The daily component is the shorter-horizon percentage term formed from the daily-length exponential averages. It uses the daily-fast and daily-slow averages in the numerator but still divides by the weekly-slow average, so both horizons share a common scale.

A combined plot with a zero line

A combined plot is formed by adding the daily component to the weekly component and drawing a zero reference line.

Russell 2000 weekly and daily percentage price oscillators

On the Russell 2000 the fast 12–26 percentage oscillator drops to about −2.4 in the October 2014 selloff while the slower 60–130 weekly term only grazes the zero line, then both climb back and hold above zero into June 2015. The readings were taken from the PPO pane of the Excel workbook screenshot, not from a printed table, so they are approximate to one tenth of a percent.
On the Russell 2000 the fast 12–26 percentage oscillator drops to about −2.4 in the October 2014 selloff while the slower 60–130 weekly term only grazes the zero line, then both climb back and hold above zero into June 2015. The readings were taken from the PPO pane of the Excel workbook screenshot, not from a printed table, so they are approximate to one tenth of a percent.Russell 2000 Index (^RUT) · Daily · 2014-07-10T00:00:00.000Z to 2015-06-30T00:00:00.000Z

Exponential lengths are fixed at 12 and 26 days and 60 and 130 days. The source pane also draws a relative-daily series (the 12–26 difference divided by the 130-day average) that could not be separated cleanly from the daily line at this resolution. A MACD pane underneath repeats the same turns on an absolute scale of about −33 to +38.

Percentage scale and the MACD contrast

Because of that percentage construction, the oscillator is presented as better suited to comparing different securities.

The related MACD contrast is a difference-of-averages construction that is left in price units. That difference construction is presented as better suited to locating overbought and oversold levels on a single security.

Weekly lengths from a daily multiplier

An alternative implementation obtains weekly-length averages by multiplying the daily fast and slow lengths by a configurable multiplier whose default is 5.

Similar shape, changing vertical scale

Over longer chart spans the MACD pattern can remain similar in shape to the percentage oscillator while its vertical scale varies enough to make portions of the MACD pattern hard to read.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
79 of 80 in the MACD track
202028-39 pp.Next on MACDConstructing Wyckoff tape reading with MACD, moving-average, and RSI filtersThe construction treats short- and intermediate-term price as a participant-behavior problem, so tape action can be read for probable direction even though long-run prices are still said to answer to fundamentals.
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 fieldIndicators and filters682 readingsBy year201898 readings
All 115 readings tagged MACD
Also on MACD5 readings
1991MACD parameter order and cycle phase lag1992Long-horizon MACD construction from paired exponential averages1994Constructing lag-reduced double exponential averages for MACD1994Constructing MACD from lag-reduced exponential averages1994TEMA1 from nested exponential averages, then a two-horizon MACD