8 reasons to stop using MACD (and use this instead)

A Bloomberg study discovered MACD is the second most popular indicator after the RSI.

But the MACD has BIG problems.

And Alex Spiroglou has the solution.

Here’s 8 reasons traders should consider updating to a new MACD indicator, from my podcast discussion with Alex:

MACD Challenges

MACD has serious limitations.

It can’t be compared across different timeframes or markets. It doesn’t adapt well to extreme readings, gives misleading divergence, and isn’t a true gauge of market strength.

This results in poor quality insights. So, what’s the solution?

Normalizing Indicators

Normalizing indicators can improve their effectiveness and make them comparable across different timeframes and markets.

Normalizing the MACD by volatility (MACD-v) can overcome limitations and provide better market insights.

The benefits include:

Benefit #1: Normalized Scaling

MACD-v indicator values can be compared across different timeframes and securities.

This allows traders to accurately compare momentum levels across various markets and timeframes.

Benefit #2: Adapts to Trends

The MACD-v can effectively adapt to trends as it is not limited by a fixed range of values.

It expands as the market trend strengthens, providing a clearer indication of momentum.

Benefit #3: Regime Filtering

The MACD-v can be used as a regime filter.

Traders can identify different market conditions by defining overbought and oversold levels based on MACD-v ranges.

This allows more precise entry and exit points.

Benefit #4: Better Divergence Signals

The MACD-v improves the quality of divergence signals compared to the traditional MACD.

It also avoids false divergence signals that can occur when the indicator gets pegged at extreme levels.

Benefit #5: Momentum Lifecycle

The MACD-v indicator can be integrated with the Momentum Lifecycle Roadmap.

This provides traders with a comprehensive view of market conditions and potential trading opportunities.

Benefit #6: Multi-Timeframe, Multi-Factor Approach

MACD-v fits into a comprehensive trading process using a combination of macro factors, technical indicators, and setups can provide a comprehensive trading strategy.