Skip to main content

MACD Histogram

This method is based on the MACD histogram, a well-known technical indicator for trend analysis. It particularly focuses on signals that indicate a possible crossover when the MACD signal line arrives at a specific level.

The MACD histogram, an abbreviation for Moving Average Convergence Divergence histogram, is a widely utilized tool among traders for recognizing potential entry and exit points in a stock's price chart. It's derived by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA, resulting in a line that fluctuates above and below the zero line. A bullish signal arises when the MACD line goes above the signal line (a 9-period EMA of the MACD), while a cross below denotes a bearish signal.

By plotting the difference between the MACD line and the signal line as bars above and below the zero line, the MACD histogram enhances this analysis. This visualization helps to detect momentum shifts and confirm trend reversals more easily.

Utilizing the Method

Gunbot initiates one position, either long or short, and closes it upon reaching the target. If the stop is triggered before successfully closing a trade, Gunbot will set a stop order at a loss. After closing a position, Gunbot will seek to open a new long or short position, without adding to any existing open positions.

Criteria for Long Positions

A long position can be initiated when the MACD histogram moves above the zero line.

Criteria for Short Positions

A short position can be initiated when the MACD histogram moves below the zero line.

Closing Conditions

The position is closed when the desired ROE (return on equity) is achieved. This value is calculated as a percentage from the entry point, factoring in leverage.

Stopping Conditions

When the negative ROE reaches the STOP_LIMIT target, the position is closed at a loss.