Today I wondered why the MACD oscillator uses the differences of two averages instead of the log of their quotient just like it's done for volatility estimation.

With this kind of log normalization values would be comparable across all asset pairs and the values would still be centred around 0.

Is there any point I am missing out or any particular reasoning behind this?


The most likely reason I can think of is the ease of computation. Gerald Appel developed the MACD in the late 1970's, when computing resources were very limited. When doing calculations by hand, on paper, it's much easier to take the difference of two simple (or exponential) moving averages than the log of their quotients.

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  • $\begingroup$ Thank you for your reply. Given the ease of computation today, do you think that would be a sensible extension or is there any pitfall I am missing? $\endgroup$ – flxh Jan 20 '18 at 8:19
  • $\begingroup$ The only pitfall I can think of is if there is potential either average to equal zero (e.g. the price of a spread). $\endgroup$ – Joshua Ulrich Jan 25 '18 at 2:15
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    $\begingroup$ It makes more sense to log normalize the MACD. It will then provide a signal line that can be cross comparable. As it currently stands, the MACD reading is idiosyncratic on the price. $\endgroup$ – David Addison Jan 27 '18 at 17:26

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