Ultimate Algorithmic Trading System

Based on our knowledge of the MACD and the chart examples, Box 2.7 shows a
simple MACD histogram-trading algorithm.
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STOCHASTICS AND AVERAGES AND RSI! OH, MY!
Box 2.7 Gerald Appel’s MACD Histogram System
Notice how the algorithm description in this example is getting closer and closer
to pseudocode. As you evolve as a system tester, you will notice how the lines
that separate description, pseudocode, and actual code start to blur. LeftBar2 is
the second bar to the left of the pivot high/low bar and LeftBar1 is the first bar
to the left of the pivot. The other variable names should be self-explanatory.
myMACD = MACD(C,12,26)
myMACDAvg = Xaverage(MACD,9)
myMACDDiff = myMACD − myMACDAvg
leftBar2 = myMACDDiff[4]
leftBar1 = myMACDDiff[3]
centerBar = myMACDiff[2]
rightBar1 = myMACDDiff[1]
rightBar2 = myMACDDiff[0]
If leftBar2 < 0 and rightBar2 < 0 and centerBar < leftBar1 and centerBar
< leftBar2 and centerBar < rightBar1 and centerBar < rightBar2, then
Buy MOC
If leftBar2 > 0 and rightBar2 > 0 and centerBar > leftBar1 and centerBar
> leftBar2 and centerBar > rightBar1 and centerBar > rightBar2, then
SellShort MOC
If position is long
Take Profit: If close > entry price + 3 ATR Sell MOC
Protective Stop: If close < entry price − 1 ATR Sell MOC
If position is short
Take Profit: If close < entry price − 3 ATR BuyToCover MOC
Protective Stop: If close > entry price + 1 ATR, BuyToCover MOC
*MOC = market on close
Gerald Appel’s MACD Histogram System p – code
‘Gerald Appels MACD histogram algorithm
‘Buys – histogram forms a low 2 bar pivot with all bars below 0
‘Shorts – histogram forms a high 2 bar pivot with all bars above 0
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