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System concept:
This system appeared in moving average convergence-divergence (MACD) creator Gerald Appel’s book Technical Analysis: Power Tools for Active Investors (FT Press, 2005). It represents how a modified (long-only) trend-following system attempts to improve performance by using different indicator settings in different market conditions.
Strategy rules:
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When a “very positive” condition is in effect, buy the next bar at the open when the “fast” MACD crosses above its zero line.
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When a “neutral-to-positive” or a “clearly negative” condition is in effect, buy the next bar at the open and when the “faster” MACD crosses above its zero line.
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When a “very positive” or “neutral-to-positive” condition is in effect, sell the position at the market when the “slow” MACD crosses below its zero line.
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When a “clearly negative” condition is in effect, sell the position at the market when the “faster” MACD crosses below its zero line.