MACD Crossover Alert on Thinkorswim
MACD is short for Moving Average Convergence Divergence which is used for any share, stock price, or cryptocurrency chart for technical analysis. It is a trend that consists of two lines and shows the relationship between them. To calculate MACD, the 26-period exponential moving average or EMA is substituted from the 12-period EMA.
The alert can be crucial for you to get early signs for an uptrend or downtrend. Whenever the crossover happens, there is a shift in trend for that particular stock price, and it can consist of several candles and wicks that can be traded for profits.
MACD Crossover Alert on ThinkorSwim Option 1: Built-in MACDHistogramCrossover
Your first option is the MACDHistogramCrossover function built-in to Thinkorswim.
The parameters can be changed:
When working correctly it will look like this:
Courtesy of Hahn-Tech code can be added to give you audio alerts which can be a big help.
Alert(DownSignal == ZeroLine, "Down Arrow Alert", Alert.BAR, Sound.RING);
Alert(UpSignal == ZeroLine, "Up Arrow Alert", Alert.BAR, Sound.RING);
This should alert you with a ring whenever you get the MACD crossover on the chart whether it is downwards or upwards.
Configurations in Thinkorswim
Thinkorswim MACD Histogram Crossover Alert also allows you several configurations to set the alert according to your preference, and it makes perfect sense to give them a try if you are eyeing a better experience on these charts. By clicking on the "gear" icon for settings, you can choose the EMA value, along with the color options of your choice so you can have more convenience.
How Does it work with Thinkorswim?
Once you have the code implemented correctly, and it is activated as an indicator on your Thinkorswim, you should see a bar on top of your chart saying "MACD Crossover" After that, the lines can be activated from the settings as well, and you can see those change in the real-time. At the same time, you will also get an arrow, pointing upwards or downwards in case of MACD crossover on thinkorswim charts.
It will cover all the crossovers according to the settings, and you can easily monitor them by staying active on the chart.
MACD Crossover Alert on ThinkorSwim Option 2: User Script
This code originally dates from June 2019 but the thread has updates as recently as August 8th 2022, 11 days before this article was published.
As always, input the script by then going to Watchlist->Clicking on the "gear" icon ->Customize->Custom quotes
A column with colored bars is added to your watchlist,
Orange = Neutral
Red= Bearish crossover
Green = Bullish crossover
There is a huge number of modifications created by users and with the thread still active there is perhaps more to come.
Other Indicators to Use with The MACD Crossover?
There are also some other indicators that you can use in confluence with the MACD crossover to get optimal results for you. It is pretty simple and doesn't take much time or effort either. Yet, you increase the chance of getting the right position in the markets if you are positioning yourself with patience.
RSI: RSI or relative strength index is one such key indicator that goes great with the MACD. At times, you can see an alert on your Thinkorswim MACD alert that you have set, but the RSI might not be in your favor. That means you have to take a risky position there if you got with the MACD alert alone.
However, if you choose such alerts that have the same trend signal on the RSI as well, that can be a safer position and two indicators pointing to the same side of the trend are always better than one.
For example, if the RSI is below 30 for a particular stock, and you see a MACD alert for the downside, that downwards trend might be short-lived, and having a long position there at the bottom could be a wise choice for you.
You might also be interested in Laguerre RSI.
Drawbacks of MACD Crossover Alert on Thinkorswim
MACD is a useful indicator, however, it also lags at times like any other indicator, and relying on MACD Crossover Alert solely for making your trading decisions is not a great option. There are two major issues that you can have to face, and those are:
- False Alerts: At times, you get a MACD Crossover Alert on your Thinkorswim portal, and that might not indicate the change the trend at all. The price can stay at the same levels for some time and then it will continue with the previous trend.
- Not covering all reversals: Another possible drawback that you may have to deal with is possible reversals. There are times when the trend will reverse, but since the MACD has a distance between two EMAs, it will not be able to catch the shift in trend timely.
MACD crossover alert can help you detect trend reversals in timely manner and a lot more. At the same time, it has its drawbacks as well that you must be aware of. It is a good indicator generally, but seasoned traders don’t base their trading strategies and decisions on a single indicator.
That is why, you need to ensure that you are checking the chart patterns, price changes, RSI, and any other indicators that you have in place with your system, and the safest way to trade using the MACD Crossover Alert on Thinkorswim would be if it is in confluence with all the other indicators that you are using for your trading system.