METASTOCK EXPLORATION FORMULA
for MACD Histogram Divergence

Notes: MACD Histogram Divergence is regarded by Alexander Elder, author of TRADING FOR A LIVING and COME INTO MY TRADING ROOM, as the strongest signal in technical analysis. According to him, this signal only appears once or twice a year on daily charts, and is worth waiting for. A bullish divergence occurs when prices trace a bottom, rally and then sink to a new low, while at the same time MACD Histogram ticks up from its second bottom. A bearish divergence occurs when prices rise to a new high, decline, and then rise to a higher peak, while at the same time MACD Histogram rises to a much lower high. For detailed discussion and illustration, please read COME INTO MY TRADING ROOM, available at a discount from http://www.investorshop.com.au



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Enter below into Column A
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md := MACD();

mdhist := md - Mov(md,9,E);

Correl(((Sum(Cum(1)*( mdhist ),100))-(Sum(Cum(1),100)*

Sum(( mdhist ),100)/100))/((Sum(Power(Cum(1),2),100))-

(Power(Sum(Cum(1),100),2)/100)),((Sum(Cum(1)*C,100))-(Sum(Cum(1),100)*

Sum(C,100)/100))/((Sum(Power(Cum(1),2),100))-(Power(Sum(Cum(1),100),2)/100)

),12,0)





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Enter below into the Filter column
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colA and colA <-0.8





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Combining additional signals
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The above formula can also be combined with a volatility buy signal and a volume signal. The following addition is then made.

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Column B: The volatility buy signal
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H > Ref(C,-1) + 1.8 * Ref( ATR(10),-1)

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ColC: Volume 10% above the average of the previous 10 days
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V > 1.1 * Ref( Mov(V,10,E),-1)

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Filter Column:
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colA AND colB AND colC AND colA <-0.80