Friday, December 13, 2013

McGinley MACD

This week we continue to look at the McGinley Dynamic.  Obviously the most common and immediate thing one would think of doing with a moving average is to look at how to trade with it. The easiest thing we can do is to create a MACD using the McGinley Dynamic. To make comparison easier we will create a MACD using two McGinley average averages with the Dynamic tracking factors similar to the conventional MACD which is 12 and 26.  The McGinley MACD clearly much smoother and is less prone to whipsaws. It keeps one in trade for long catching big trends nicely. Of course there is always a price to pay for this. The McGinley MACD is lagging by a few bars compared to the conventional MACD. Well, it may be better than being whipsawed and losing money. Also the peak draw down because of the lag is much better than being thrown out of trade much earlier in most cases. I did not run a back test on the McGinley MACD. If somebody does care to do the back test it please let us know the results.  I am posting it here as it looks worth trying out. AFL posted here for anyone who cares to try it out.