"Color Your Momentum: Unlock Precise Trend and Momentum Signals with 3ColorMACD!"
1. Overview of the Indicator:
The 3ColorMACD is a custom oscillator indicator designed for momentum and trend detection in the financial markets, particularly useful for Forex trading. It builds on the classic MACD (Moving Average Convergence Divergence) concept but enhances it by applying three distinct colors to its histogram bars to provide clearer visual cues about momentum shifts and trend strength.
Type: Custom Oscillator / Momentum Indicator
Key Features:
Uses three colors for MACD histogram bars to differentiate bullish momentum, bearish momentum, and neutral phases.
Helps traders quickly identify potential trend reversals, entry, and exit points.
Includes customizable parameters for EMAs and signal smoothing to adapt to various trading styles.
This color-coded approach makes it easier for traders to spot changes in momentum compared to the standard MACD, reducing ambiguity in interpretation.
2. How the Indicator Works:
Logic and Algorithm:
The indicator calculates two Exponential Moving Averages (FastEMA and SlowEMA) to measure momentum.
It then computes a Signal line by applying a Simple Moving Average (SignalSMA) to the difference between these EMAs.
The MACD histogram represents the difference between the MACD line (FastEMA - SlowEMA) and the Signal line.
Bars change color based on whether momentum is increasing, decreasing, or neutral:
Blue: Increasing bullish momentum
Magenta: Increasing bearish momentum
Gray: Neutral or weak momentum
Additional colors (LimeGreen and DarkSlateBlue) may be used for line or zero level markers to enhance visual clarity.
Data Used:
Price data (typically close prices) for EMA calculations.
Calculated MACD and Signal lines for histogram representation.
Chart Output:
A multi-colored histogram below the price chart displaying momentum intensity and direction.
Optional lines (Signal and Zero Level) for reference.
Interpretation:
Rising blue bars indicate strengthening upward momentum — potential buy signals.
Rising magenta bars indicate strengthening downward momentum — potential sell signals.
Gray bars indicate consolidation or weakening momentum — caution zone.
3. How to Use / Run the Indicator:
Installation:
Copy the indicator file into the Indicators folder of your MetaTrader 4 or MetaTrader 5 terminal.
Restart the platform or refresh the Navigator window.
Applying to Chart:
Open your preferred symbol chart (e.g., GBP/USD).
Right-click the chart, select Indicators List, then add 3ColorMACD.
Adjust input parameters if desired and click OK.
Recommended Settings:
Use on Forex pairs or other liquid markets.
Timeframes: M1, M5, M15 for short-term trading; H1, H4 for swing trading.
Combine with price action or support/resistance levels for higher accuracy.
Alerts and Behavior:
Does not repaint past bars; histogram colors are fixed once the bar closes.
No built-in alerts; visual signals must be monitored actively.
Multi-timeframe analysis can be done by applying the indicator to different charts manually.
4. Input Parameters and Settings:
ParameterDefault ValueDescriptionRecommendations
FastEMA12Period for the fast EMA used in MACD calculationShorter for faster signals, longer for less noise
SlowEMA26Period for the slow EMA in MACDAdjust based on trading style
SignalSMA9Period for the Signal line smoothingHigher value smooths signals, lower reacts faster
CountBars300Number of bars the indicator processes and displaysIncrease for more history, decrease for speed
Line3Width of lines displayed (signal, zero level)Visual preference
Zero_level0.0Reference zero level on the histogramUsually zero; adjust if needed
5. Additional Notes:
The 3ColorMACD enhances the standard MACD by improving visual clarity of momentum changes but should be combined with other tools like trendlines or RSI for confirmation.
It is suitable for both MT4 and MT5 platforms, depending on the version installed.
Not designed to provide automatic trade signals or alerts — it is primarily a visual aid.
The indicator can be less effective during highly choppy or sideways markets where momentum signals may give false indications.
Recommended to test in demo accounts before live trading to understand its nuances fully.
Origin: The indicator appears to be a custom version of the classic MACD indicator with added color coding, common in many trading communities and forums.