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Alfredo Mayall Simas wrote:
>>I think that Jurik's is a displaced moving average
JMA is not a displaced MA. In fact it's just the opposite. More on that
later.
Although lag in the MACD signal is generally undesirable (late trades
typically profit less), the MACD actually requires lag **between** the two
lines in order to work. Otherwise, excessive crossover occurs.
One way to add lag is to make the 2nd MA line slower. You can do this by
increasing the length of the 2nd MA. However, this causes the 2nd line to
lose amplitude, delaying the moment of crossover, thereby delaying the MACD
signal itself.
Another way to add lag between the two lines is to displace the 2nd line.
This retains amplitude (good) but risks being too noisy, causing unwanted
crossovers (bad).
A superior way is to leave the 2nd line alone, and to decrease the lag of
the 1st line, while maintaining its smoothness. You can accomplish this
by using JMA for the faster line and a simple moving average for the slower
line. Now you have early crossovers, producing an early MACD signal.
- Mark Jurik
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Get the lag out at
http://www.jurikres.com
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