MACD Trading System - Professional V2

# MACD Trading System - Professional V2

## Executive Summary

**MACD Pro V2** is an institutional-grade trading indicator combining classical MACD analysis with advanced risk management, multi-timeframe confirmation, and comprehensive performance metrics. Designed for both manual traders and algorithmic systems, this indicator provides actionable signals with built-in stop loss calculation, take profit targets, position sizing, and trailing stop logic.

This indicator is NOT just a signal generator—it's a complete trading system with risk/reward management, performance tracking, and market regime detection.

---

## Core Features

### 1. Advanced MACD Calculation
- **Customizable EMAs**: Fast (default 8), Slow (default 21), Signal (default 5)
- **Confirmed Signals**: Uses barstate.isconfirmed to prevent repainting
- **Zero-Line Position**: Shows MACD above/below zero for momentum context

### 2. Multi-Timeframe Analysis
- **4 Simultaneous Timeframes**: 4H, 1H, 15M, 5M analyzed in parallel
- **MTF Alignment Score**: 0-100% showing consensus across timeframes
- **Smart Requests**: Uses lookahead=barmerge.lookahead_off for accuracy

### 3. Market Regime Detection
Automatically identifies current market conditions:
- **TRENDING** - ADX > 25, strong directional movement
- **RANGING** - ADX < 20, choppy sideways movement
- **VOLATILE** - ATR > 1.5x average, high uncertainty
- **NORMAL** - Default market state

### 4. Integrated Risk Management
Complete position management system:
- **Stop Loss Calculation**: Automatic SL placement based on ATR × multiplier
- **Take Profit Targets**: Calculated using Risk:Reward ratio (default 2:1)
- **Position Sizing**: Scales position size based on account risk percentage
- **Trailing Stop**: Dynamically adjusts SL as price moves in your favor
- **Drawdown Monitoring**: Tracks maximum drawdown vs account

### 5. Advanced Signal Scoring
0-100 point system weighing:
- **MTF Alignment (35%)**: Multi-timeframe confirmation strength
- **Momentum (25%)**: RSI conditions + Divergence detection
- **Volume (20%)**: Volume profile and confirmation
- **Volatility (20%)**: Market regime adjustment

**Signal Classifications:**
- **STRONG (70+)**: High confidence, tight stops, optimal entry
- **MEDIUM (50-69)**: Valid signals, confirm with price action
- **WEAK (<50)**: Low conviction, skip or use tight risk management

### 6. Professional Performance Metrics
Real-time trading statistics:
- **Win Rate**: Percentage of winning trades
- **Max Drawdown**: Largest peak-to-trough decline
- **Sharpe Ratio**: Risk-adjusted returns (anualized)
- **Profit Factor**: Gross profit / Gross loss ratio
- **Consecutive Losses**: Psychological stress indicator

### 7. Advanced Filtering System
- **Divergence Detection**: Automatic bullish/bearish divergence identification
- **Support/Resistance**: Pivot-based dynamic S/R levels
- **Volume Confirmation**: Only takes signals with volume > 1.0x average
- **Session Filter**: Optional trading hours restriction
- **Volatility Adjustment**: Reduces entries in extremely high volatility

---

## How It Works

### Signal Generation Process

**Step 1: MACD Crossover**
- Crossover of MACD above/below signal line triggers base signal
- Uses confirmed values to prevent false signals

**Step 2: Multi-Timeframe Confirmation**
- Checks trend alignment on 4H, 1H, 15M, 5M
- Calculates MTF alignment percentage
- Higher alignment = higher confidence

**Step 3: Advanced Scoring**
Signal is scored on 100-point scale:
- MTF alignment contribution (35 pts max)
- RSI + Divergence (25 pts max)
- Volume profile (20 pts max)
- Volatility regime adjustment (20 pts max)

**Step 4: Filter Application**
- Session filter (if enabled)
- Support/Resistance proximity bonus
- Volume confirmation requirement
- Drawdown check (if risk mgmt enabled)

**Step 5: Risk Calculation**
- Stop Loss placed 2 ATR below entry (customizable)
- Take Profit calculated using 2:1 risk/reward ratio
- Position size scaled to risk 1% per trade
- Trailing stop activated after 1R profit

**Step 6: Signal Output**
- Buy Signal: Green triangle (Strong) or circle (Medium)
- Sell Signal: Red triangle (Strong) or circle (Medium)
- Dashboard shows complete trade details

---

## Trading Scenarios

### Scenario 1: Strong Buy Setup
```
Requirements met:
✓ MACD crosses above signal line
✓ 3/4 timeframes bullish (4H, 1H, 15M)
✓ RSI oversold (< 30)
✓ Volume spike confirmed
✓ Score: 78/100 → STRONG BUY

System provides:
- Entry: Current price
- Stop Loss: 2 ATR below entry
- Take Profit: 2× risk distance above
- Position Size: Adjusted to 1% account risk
- Trailing Stop: Activates at 1R profit
```

### Scenario 2: Medium Buy with Divergence
```
Requirements met:
✓ MACD crosses above signal line
✓ 2/4 timeframes bullish (4H, 1H)
✓ Bullish divergence detected
✓ Price near support level
✓ Score: 62/100 → MEDIUM BUY

Considerations:
- Lower confidence → tighter risk management
- Use smaller position size
- Require additional confirmation
- Better as counter-trend entry
```

### Scenario 3: Ranging Market Filter
```
Market condition detected: RANGING
ADX < 20, sideways movement

System response:
- Reduces signal score by volatility adjustment
- May skip signals entirely
- Prioritizes higher confluence
- Warns of low trend probability

Best action: Wait for trending market
```

---

## Risk Management Deep Dive

### Stop Loss Calculation
```
Stop Loss Distance = ATR × ATR Multiplier (default 2.0)

Example:
- Current price: 1.0850
- ATR(14): 0.0045
- SL Distance: 0.0045 × 2.0 = 0.009
- BUY SL: 1.0850 - 0.009 = 1.0760
```

### Position Sizing
```
Position Size = (Account Risk % / Price Risk %)

Example:
- Risk per trade: 1% of account
- Stop distance: 0.009 on price of 1.0850
- Price risk: 0.009 / 1.0850 = 0.83%
- Position size: 1.0% / 0.83% = 1.2x (capped at 1.0x max)
```

### Trailing Stop Logic
```
Normal SL: 2 ATR below entry
Trigger Level: Entry + (Entry - SL) × Trail Activation (1.0R)

Trailing Mechanism:
- If price hits trigger, trailing SL activates
- SL moves up to: Close - 2 ATR
- SL never moves down, only up (for longs)
- Protects profits while allowing upside
```

### Drawdown Protection
```
Tracks:
- Peak equity reached
- Current drawdown from peak
- Maximum drawdown recorded
- Stops trading if max DD exceeded

Example:
- Peak: $10,000
- Current: $9,200
- Drawdown: 8%
- Max allowed: 10%
- Status: CONTINUE TRADING
```

---

## Dashboard Metrics Explained

### Market Section
- **Market Regime**: Current state (Trending/Ranging/Volatile/Normal)
- **ADX Value**: Trend strength indicator (0-100)

### Position Section
- **Current Position**: LONG, SHORT, or NONE
- **P&L**: Unrealized profit/loss percentage if in position

### Timeframe Section
- Individual 4H/1H/15M trend status
- **Alignment**: Percentage of bullish timeframes

### Risk Management Section
- **Stop Loss %**: Distance from current price
- **Take Profit %**: Target profit distance
- **Position Size**: Capital allocation multiplier
- **Risk %**: Per-trade risk percentage

### Performance Section
- **Win Rate**: % of winning trades (>60% is excellent)
- **Max DD**: Maximum drawdown experienced
- **Sharpe Ratio**: Risk-adjusted return metric
- **Profit Factor**: Ratio of profits to losses

### Indicators Section
- **RSI**: Momentum and overbought/oversold levels
- **Volume**: Current vs. average volume ratio
- **Divergence**: Active divergence detection

---

## Advanced Features

### Divergence Detection
```
Bullish Divergence:
- Price makes lower low
- MACD makes higher high
- Signals potential reversal UP

Bearish Divergence:
- Price makes higher high
- MACD makes lower low
- Signals potential reversal DOWN

Lookback: 20 bars (customizable)
```

### Support & Resistance
```
Method: Pivot High/Low detection
- Pivot Left/Right: 10 bars
- Dynamic S/R levels update as new pivots form
- Bonus score if entry near identified levels
```

### Performance Tracking
Real-time statistics calculated from:
- Win/loss signals
- Profit/loss per trade
- Consecutive losing trades
- Cumulative returns
- Standard deviation (Sharpe calculation)

Stores last 100 trades in memory for statistics.

---

## Input Parameters Explained

### MACD Settings
- **Fast EMA** (5-13): Lower = more responsive, more false signals
- **Slow EMA** (20-26): Higher = smoother, misses faster moves
- **Signal EMA** (5-9): Crossover sensitivity

### Risk Management
- **ATR Period** (default 14): Volatility measurement period
- **SL ATR Multiplier** (1.5-3.0): Stop loss tightness
- **Risk:Reward Ratio** (1-5): Profit target calculation
- **Trail Activation** (0.5-2.0): When to start trailing stop
- **Risk Per Trade** (0.1-5.0): Account risk percentage
- **Max Drawdown** (5-30%): Trading pause threshold

### Scoring Weights
Customize signal emphasis:
- **MTF Alignment** (35%): How important is multi-timeframe
- **Momentum** (25%): RSI and divergence weight
- **Volume** (20%): Volume confirmation priority
- **Volatility** (20%): Regime adjustment strength

### Advanced Filters
- **Check Divergence**: Enable/disable divergence scoring
- **Session Filter**: Restrict to specific hours
- **Min Volume Ratio**: Minimum volume for signal

### Display
- **Show Dashboard**: Main metrics table
- **Show Performance**: Trading statistics
- **Show S/R Levels**: Support/resistance visualization

---

## Best Practices

1. **Backtest Before Trading**: Test parameters on your preferred pairs
2. **Start with Strong Signals**: Use only 70+ scored signals initially
3. **Position Size**: Never risk more than 1-2% per trade
4. **Market Regime Awareness**: Skip ranging market entries
5. **Volume Confirmation**: Always check volume spikes
6. **Profit Taking**: Lock in profits at TP, don't let winners die
7. **Loss Management**: Honor stop losses, don't move them
8. **Performance Review**: Check metrics weekly, adjust if needed

---

## Trading Strategy Examples

### Conservative Strategy (Win-Rate Focus)
```
Settings:
- Signal Score Minimum: 70+ (Strong only)
- Risk Per Trade: 0.5%
- Risk:Reward: 3:1
- Position Size: 0.5x (smaller)

Targets:
- Win Rate > 65%
- Max DD < 5%
- Profit Factor > 2.0
```

### Aggressive Strategy (Profit Focus)
```
Settings:
- Signal Score Minimum: 50+ (Medium+)
- Risk Per Trade: 2%
- Risk:Reward: 1.5:1
- Position Size: 1.0x (maximum)

Targets:
- Win Rate > 55%
- Max DD < 10%
- Profit Factor > 1.5
```

### Trend Trading Strategy
```
Settings:
- Only trade when ADX > 25 (Trending)
- MTF Alignment: 3+ timeframes
- Use Trailing Stop: Yes
- Risk:Reward: 2.5:1

Focus on: Riding large moves
Best on: 4H timeframe
Pairs: Trending majors (EURUSD, GBPUSD)
```

### Divergence Trading Strategy
```
Settings:
- Signal Score Minimum: 60+
- Enable Divergence: Yes
- Volume Confirmation: Required
- Position Size: 0.75x

Focus on: Reversal entries
Best setup: Divergence at resistance/support
Risk management: Tight stops (1.5 ATR)
```

---

## Advantages

✓ Complete trading system, not just signals
✓ Built-in risk management and position sizing
✓ Real-time performance tracking
✓ Multi-timeframe confirmation reduces false signals
✓ Advanced filtering and divergence detection
✓ Market regime awareness
✓ Customizable scoring weights
✓ Professional dashboard display
✓ Support/resistance integration
✓ Trailing stop logic for profit protection

---

## Limitations

- Lagging indicator (uses confirmed bars)
- Works best on trending markets
- Not optimized for news/event trading
- Requires parameter optimization per pair
- Performance varies by timeframe
- Past performance doesn't guarantee future results
- Can produce whipsaw signals in ranging markets

---

## System Requirements

- TradingView Premium or higher (for advanced charting)
- Recommended: 4H or 1H timeframe
- Historical data: Minimum 100 bars
- Currency pairs: Works on all FX pairs, stocks, commodities

---

## Disclaimer

This indicator is provided for educational and informational purposes only. It is not financial advice and does not guarantee profits. Past performance does not predict future results.

**Important Notices:**
- Always use proper risk management
- Trade only with capital you can afford to lose
- Backtest thoroughly before live trading
- Combine with your own analysis
- Consider external market factors and news
- Monitor positions actively
- Keep emotional discipline

---

## Support & Optimization

For best results:
1. Test on your preferred instrument (6-12 months history)
2. Adjust MACD parameters to your timeframe
3. Optimize scoring weights to your style
4. Set risk management per your account size
5. Document your trade results and review weekly
6. Adapt parameters if performance degrades

This is a powerful system when used correctly. Respect the rules and let statistics work in your favor.