MACD Remastered [CHE]

MACD Remastered [CHE] — Robust MACD with confirmed pivot-based divergence, optional signal bands, and ready-to-use alerts.

Summary

This indicator augments classic MACD with a robust, confirmed pivot-based divergence engine and an optional signal channel using Bollinger Bands. Divergence signals are only produced after a pivot is confirmed, which reduces noise from transient swings. A line-of-sight clearance check filters cases where the MACD histogram path contradicts the divergence, further cutting false flags. Histogram coloring clarifies momentum changes, while optional triangles project the same signals onto the main chart for quick context.

Motivation: Why this design?

Standard MACD divergence tools tend to fire early in volatile phases and flip during consolidation. The core idea here is to delay decision points until a pivot is confirmed and to validate the path between pivots. This addresses fake flips and improves signal credibility at the cost of some latency. Optional bands around the Signal line add context about compression and expansion without altering MACD’s core behavior.

What’s different vs. standard approaches?

Reference baseline: Classical MACD (fast and slow moving averages, Signal line, histogram) with simple divergence checks.
Architecture differences:

Confirmed pivot logic with left and right bars.
Line-of-sight clearance test across the histogram path between pivots.
Optional Signal-line Bollinger Bands with configurable length and width.
Composite “Any Divergence” alert plus separate regular and hidden alerts.
Optional main-chart triangles using forced overlay for at-a-glance context.
Practical effect: Fewer early or contradictory divergence signals, clearer momentum context via histogram colors and a visible Signal channel during compression and expansion.

How it works (technical)

The MACD line derives from a fast and a slow moving average on a chosen source. The Signal line smooths the MACD line using a selected moving average type and length. The histogram is the difference between MACD and Signal and is colored by direction and acceleration.
Divergence uses confirmed pivots: a pivot forms only after a set number of bars on the right side, so the event is locked in. The engine retrieves the last two relevant pivots and checks price movement versus the MACD histogram movement to classify regular or hidden divergence. A line-of-sight clearance routine traverses the histogram path between the two pivots and rejects the signal if the path invalidates the directional relationship. When enabled, Bollinger Bands are plotted around the Signal line; width scales with standard deviation. Programmatic alerts fire only on confirmed bars. No higher-timeframe requests are used.

Parameter Guide

Oscillator MA Type — Sets fast and slow MA family for MACD. Default: EMA. Tip: EMA is more responsive; SMA is steadier.
Fast Length — Fast MA period. Default: 12. Trade-off: Shorter is quicker but noisier.
Slow Length — Slow MA period. Default: 26. Trade-off: Longer reduces noise but adds lag.
Source — Price input. Default: Close. Tip: Use a stable source for consistency.
Signal MA Type — Moving average family for Signal. Default: EMA.
Signal Length — Smoothing of MACD into Signal. Default: 9. Trade-off: Longer smooths more, reacts slower.
Calculate Divergence — Enables divergence engine. Default: True.
Enable Bollinger Bands on Signal — Adds bands around Signal. Default: False.
BB Length — Sampling window for bands. Default: 20. Active: Only when bands are enabled.
BB StdDev — Band width in standard deviations. Default: 2.0. Bounds: between about zero point zero zero one and fifty.
Pivot Left / Pivot Right — Bars to the left and right that define a confirmed pivot. Default: five and five. Trade-off: Larger values mean stronger but slower pivots.
Min / Max Bars Between Pivots — Valid window between two pivots. Default: five and sixty. Tip: Increase minimum to reduce micro-divergences.
Detect Hidden — Include hidden divergence. Default: True.
Draw Lines — Draw connector lines on the MACD pane. Default: True.
Alerts: Enable / Regular / Hidden / Frequency / Prefix — Control alert emission, categories, cadence, and label. Defaults: Enabled, both categories on, once per bar close, prefix “MACD RM”.

Reading & Interpretation

Histogram: Columns above zero reflect positive momentum; below zero reflect negative momentum. Color shifts indicate momentum increasing or decreasing within each side.
MACD and Signal: Crosses and distance indicate momentum shifts and strength. When bands are enabled, touches and departures hint at compression and expansion around the Signal.
Divergence: Solid green lines and labels indicate regular bullish; solid red indicate regular bearish. Dashed teal and dashed orange denote hidden bullish and hidden bearish. Triangles on the main chart mirror these events for quicker visibility.

Practical Workflows & Combinations

Trend following: Use histogram color transitions with a structure filter such as higher highs and higher lows for long bias, or lower highs and lower lows for short bias. Divergence against the prevailing structure suggests caution or partial exits.
Exits and risk: In a long, regular bearish divergence near resistance can justify scaling out or tightening stops. Hidden divergence in the trend direction can support continuation but should not replace risk controls.
Multi-asset / Multi-timeframe: Works across liquid futures, forex, indices, and large-cap equities. Start with defaults on four-hour and daily; shorten lengths on intraday only when liquidity is strong.

Behavior, Constraints & Performance

Repaint and confirmation: Signals are anchored only after the right-side pivot bars complete; alerts trigger on confirmed bars. This intentionally adds latency to reduce noise.
No higher-timeframe requests: No `security` calls are used; repaint risk is primarily tied to live bars before confirmation.
Resources: Declared `max_bars_back` is five hundred. The divergence path check iterates between pivots, bounded by the maximum bars parameter. Line objects may accumulate; limits are set for lines and labels.
Known limits: Latency at sharp turns, potential misses during fast single-bar reversals, and sensitivity to extremely choppy sessions if minimum gap between pivots is set too low.

Sensible Defaults & Quick Tuning

Starting point: EMA, twelve and twenty-six with Signal nine; pivots five and five; minimum five, maximum sixty; alerts on close; bands off.
Too many flips: Increase Signal length, raise pivot counts, and increase minimum bars between pivots. Consider disabling hidden divergence.
Too sluggish: Reduce pivot counts, lower Signal length, and enable bands to visualize early compression.
Cluttered chart: Keep lines off and rely on labels and main-chart triangles. Use the alert prefix to route events cleanly.

What this indicator is—and isn’t

This is a visualization and signal layer for MACD with confirmed, path-checked divergence and optional Signal bands. It is not a trading system, not predictive, and not a position management framework. Use it together with structure analysis, liquidity context, and explicit risk controls.

Disclaimer

The content provided, including all code and materials, is strictly for educational and informational purposes only. It is not intended as, and should not be interpreted as, financial advice, a recommendation to buy or sell any financial instrument, or an offer of any financial product or service. All strategies, tools, and examples discussed are provided for illustrative purposes to demonstrate coding techniques and the functionality of Pine Script within a trading context.

Any results from strategies or tools provided are hypothetical, and past performance is not indicative of future results. Trading and investing involve high risk, including the potential loss of principal, and may not be suitable for all individuals. Before making any trading decisions, please consult with a qualified financial professional to understand the risks involved.

By using this script, you acknowledge and agree that any trading decisions are made solely at your discretion and risk.

Do not use this indicator on Heikin-Ashi, Renko, Kagi, Point-and-Figure, or Range charts, as these chart types can produce unrealistic results for signal markers and alerts.

Best regards and happy trading

Chervolino