MACD-V Volatility Normalisation

MACD-V Weekly time frame – FTSE All Share

MACD-V Weekly time frame – S&P 500

MACD-V Weekly time frame – NASDAQ100

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AI hosted podcast – A Guide to MACD-V created by Alex Spiroglou

Understanding MACD-V

This educational content is based on Alex Spiroglou’s research paper “MACD-V: Volatility Normalised Momentum” and is provided for educational purposes only. No financial advice is given or implied.

Introduction: The Problem with Traditional Momentum Indicators

For decades, traders and analysts have relied on Gerald Appel’s Moving Average Convergence Divergence (MACD) indicator to identify momentum shifts in financial markets. While the MACD remains one of the most widely used technical indicators, it suffers from several fundamental limitations that can mislead even experienced market participants.

The core issue is simple: traditional MACD values are not comparable across time periods or different securities. A MACD reading of +50 on the S&P 500 today means something entirely different than the same reading did in 1980, and it’s completely incomparable to a +50 reading on a commodity like natural gas or a currency pair.

This is where Alex Spiroglou’s groundbreaking work on volatility-normalized momentum becomes invaluable.

Alex Spiroglou’s MACD-V Innovation

Alex Spiroglou, DipTA (ATAA), CFTe, MSTA, and winner of the N.A.A.I.M. Founders Award 2022, identified that the fundamental problem with traditional momentum indicators lies in their failure to account for the underlying volatility of the security being analyzed.

The Five Limitations of Traditional MACD

Spiroglou’s research identified five critical shortcomings of the classic MACD:

1. Time Instability: MACD readings cannot be compared across different time periods for the same security
2. Cross-Market Incomparability: MACD values differ dramatically between asset classes due to absolute price differences
3. Lack of Objective Scaling: No standardized framework exists for defining “high” vs “low” momentum
4. Signal Line Inaccuracy: Crossover signals become unreliable in low momentum environments
5. Signal Line Timing: Crossover signals arrive late during rapid trend reversals in high momentum conditions

The MACD-V Solution

Spiroglou’s innovation was elegantly simple yet profound: normalize the MACD calculation by dividing it by Average True Range (ATR) instead of price.

Traditional MACD Formula:

MACD = EMA(12) – EMA(26)

MACD-V Formula:

MACD-V = [(EMA(12) – EMA(26)) / ATR(26)] × 100

This small but crucial modification transforms the MACD from an absolute price indicator into a volatility-adjusted momentum measure. The result is a “universal momentum language” that works consistently across all timeframes and asset classes.

The MACD-V Momentum Lifecycle Framework

Perhaps Spiroglou’s most significant contribution is the Momentum Lifecycle RoadMap – a comprehensive framework that classifies momentum into eight distinct states based on both the MACD-V level and its relationship to the signal line.

The Eight Momentum States

MACD-V Range	Above Signal Line	Below Signal Line
> 150	Risk	Risk
50 to 150	Rallying	Retracing
-50 to 50	Ranging	Ranging
-150 to -50	Rebounding	Reversing
< -150	Risk	Risk

Understanding Each State

Risk (±150): When momentum exceeds 1.5 times average volatility, markets have historically become unsustainable in the short-to-intermediate term. This occurs roughly 5% of the time across all markets.

Rallying/Reversing (±50 to ±150): Strong directional momentum representing roughly 35-40% of market activity. The key distinction is whether the MACD-V line is above or below its signal line.

Ranging (±50): Low momentum periods where the market lacks directional conviction, representing 45-50% of market time. Price typically consolidates during these phases.

Retracing/Rebounding: Transition states where momentum is moving against the prevailing signal line direction, often indicating either temporary pullbacks or emerging reversals.

Why MACD-V Matters: Universal Applicability

Spiroglou’s extensive back testing across multiple asset classes (equities, bonds, commodities, currencies) spanning decades reveals that these momentum ranges hold remarkably consistent statistical properties. Whether analysing the S&P 500, German Bunds, or Natural Gas futures, approximately:

• 5% of time is spent in “Risk” territory (±150)
• 50% of time is spent in strong momentum ranges (±50 to ±150)
• 45% of time is spent in low momentum “Ranging” conditions (±50)

This universality is unprecedented in technical analysis and provides traders with objective, quantifiable momentum benchmarks that work across all markets.

Our MACD-V Momentum Screener: Practical Application

Building on Spiroglou’s research, we’ve developed a screening tool that identifies stocks experiencing recent momentum direction changes while providing crucial context about the significance of these shifts.

What the Screener Does

The screener analyses entire market indices (FTSE All Share, S&P 500) to identify stocks where:

1. MACD-V has crossed above or below its signal line within the last 5 trading days
2. Current momentum state is classified using Spiroglou’s framework
3. Results are separated into upward and downward momentum shifts

Key Features

Momentum Classification: Instead of simply reporting “bullish crossover,” the screener shows the actual MACD-V reading and momentum state. For example:

• 153.2 (Risk) – momentum has reached historically unsustainable levels
• 75.4 (Rallying) – strong upward momentum in healthy range
• -45.1 (Ranging) – weak momentum, likely consolidation

Educational Focus: The tool provides context rather than recommendations. Users learn to interpret momentum states rather than receiving buy/sell signals.

Universal Application: The same momentum ranges work whether analysing British stocks priced in pence or US stocks priced in dollars.

How to Use the Screener Effectively

1. Understanding Recency

The “Days” column indicates how fresh the momentum shift is:

• 1-2 days: Very recent shifts deserving immediate attention
• 3-4 days: Recent shifts that may have already moved
• 5 days: Older shifts that might represent established trends

2. Interpreting Momentum States

Risk Territory (±150): Exercise extreme caution. Historically, these levels prove unsustainable and often precede reversals or periods of consolidation.

Strong Momentum (±50 to ±150): These represent the most tradeable conditions, but require additional analysis to determine if you’re catching early momentum or arriving late to the move.

Ranging (±50): Low conviction environments where breakouts may be false and whipsaws common. Often better to wait for stronger momentum development.

3. Market Context Considerations

The screener shows where momentum is shifting, but your analysis must determine why. Consider:

• Overall market conditions and sector rotation
• Individual company fundamentals and news flow
• Volume patterns and institutional activity
• Support and resistance levels on price charts

4. Risk Management

Remember that momentum can change rapidly. A stock showing “Rallying” momentum today could shift to “Risk” territory within days. The screener provides snapshots, not predictions.

What the Screener Is NOT

It is not a trading system: The screener identifies momentum shifts but doesn’t generate buy/sell signals.

It is not fundamental analysis: Momentum shifts occur for many reasons – some valid, others based on noise or temporary factors.

It is not a guarantee: Past momentum patterns, while statistically robust, don’t guarantee future performance.

It is not suitable for all strategies: The tool works best for swing trading and intermediate-term analysis, less so for day trading or very long-term investing.

Educational Philosophy: Guide, Don’t Carry

Our approach emphasizes education over promotion. We believe that understanding market mechanics creates better traders than following tips or signals. The MACD-V framework provides a scientifically rigorous foundation for momentum analysis, but successful implementation requires:

1. Personal research and validation
2. Proper risk management techniques
3. Integration with other forms of analysis
4. Continuous learning and adaptation

Conclusion: Standing on the Shoulders of Giants

Alex Spiroglou’s MACD-V research represents a genuine advancement in technical analysis – solving decades-old problems with mathematical rigor while maintaining practical applicability. Our screener tool simply makes this powerful framework accessible to individual students and analysts.

The goal is not to replace human judgment but to enhance it with objective, quantifiable momentum intelligence. In an era of market complexity and information overload, having a universal framework for understanding momentum shifts provides a significant analytical advantage.

Remember: the screener shows you where momentum is changing. Your skill, experience, and additional analysis determine what to do about it.

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This educational content is based on Alex Spiroglou’s research paper “MACD-V: Volatility Normalised Momentum” and is provided for educational purposes only. No financial advice is given or implied.

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