EFS for Trading Success

EFS Featured Studies of the Month: The MACD Crossover and Bill Williams Awesome Oscillator

The EFS library is full of new and useful strategies you can use for free in eSignal.

This month, we feature a study that calculates the differences between moving averages and a simple study that shows periods fit for buying and selling.

The MACD Crossover

The MACD is calculated by subtracting a 26-day moving average of a security's price from a 12-day moving average of its price. The result is an indicator that oscillates above and below zero. When the MACD is above zero, it means the 12-day moving average is higher than the 26-day moving average. This is bullish because it shows that current expectations (i.e., the 12-day moving average) are more bullish than previous expectations (i.e., the 26-day average).

When the MACD falls below zero, it means that the 12-day moving average is less than the 26-day moving average, implying a bearish shift in the supply / demand lines.

A 9-day moving average of the MACD (not of the security's price) is usually plotted on top of the MACD indicator. This line is referred to as the "signal" line. The signal line anticipates the convergence of the two moving averages (i.e., the movement of the MACD toward the zero line).

Let's consider the rationale behind this technique. The MACD is the difference between two moving averages of price. When the shorter-term moving average rises above the longer-term moving average (i.e., the MACD rises above zero), it means that investor expectations are becoming more bullish (i.e., there has been an upward shift in the supply / demand lines). By plotting a 9-day moving average of the MACD, we can see the changing of expectations (i.e., the shifting of the supply / demand lines) as they occur.

Download the MACD Crossover EFS study

The Bill Williams Awesome Oscillator

This indicator plots the oscillator as a histogram where periods fit for buying are marked blue, and periods fit for selling are marked red.

If the current value of the Awesome Oscillator (AC) is over the previous, the period is deemed fit for buying, and the indicator is marked blue.

If the AC value is not over the previous, the period is deemed fit for selling, and the indicator is marked red.

Download the Bill Williams Awesome Oscillator EFS study

Resources for EFS

To access other EFS studies, visit the EFS Library (wait a few seconds for the Most Popular Articles listing to appear).
For detailed tutorials on EFS, including how to implement EFS studies within eSignal, visit the Help Guides and Tutorials section of the EFS KnowledgeBase.