Since MQ Momentum and MACD can often look very similar, many traders wonder what the difference is between the two.
One reason the two look very similar is that they use similar plots. The heart of either indicator is the fast line. The Fast Line's values determine both the slow line and the histograms in each of the indicators in the same way, and that's why they look similar. Since the fast line calculation determines the whole indicator, it's critical to how the indicator performs. At first glance, the difference between the two is not that noticeable. But as a trader, it can make all the difference.
The fast line calculation is what differentiates MQ Momentum from MACD. While MACD uses the difference between two EMAs to do its calculations, MQ Momentum uses the concept of True Strength in its calculations. While the two results are often similar, MQ Momentum offers an edge over MACD. MQ Momentum's Fast Line calculation results in a much more responsive line, which can identify changes in momentum more quickly than MACD's calculation. This means that MQ Momentum is more responsive than MACD, so MQ Momentum traders will know of momentum changes ahead of MACD traders. They'll know sooner when a move is about to change direction, or when a trade is going to start following through on its initial direction after a brief pullback.
Plus, there will be cases when MQ Momentum reaches through a level on the indicator while MACD does not. This difference would create instances where an MQ Momentum trader is bullish on momentum when a MACD trader is still bearish. There could also be cases where the fast and slow line crossovers don't occur at the same point. This could result in MQ Momentum showing a green histogram, for example, when MACD is still showing a red histogram. Imagine how that could impact Bull Bear Flags, for example. Your room host, using MQ Momentum, may be out of a trade with a profit when MACD hasn't yet provided the signal to close the trade. Or conditions when MACD users have exited while MQ Momentum users continue to add profits as they stay in a position. These costly differences can add up quickly.
There are also differences in the way that the histograms visually appear on the indicator. Histograms are easier to read on MQ Momentum vs. MACD, and any analysis that involves histograms is easier to do on MQ Momentum. This gives MQ Momentum traders another edge over MACD users. Another visual difference is that MQ Momentum provides +/- extension levels that MACD does not, allowing traders to gauge how far momentum is up or down regardless of market or chart zoom level. You could manually add levels to your chart at the same place, but you'll need to do that on every chart and every symbol. These important lines appear automatically in MQ Momentum on every chart and symbol.
Since we use MQ Momentum in so many of our analyses, even a slight edge can be extremely important. MQ Momentum not only reveals the direction, energy, and speed behind market moves, it's also critical in detecting Red and Green Fingers, momentum inflections, bull and bear flags, divergences, zero touches, and more. MQ Momentum is typically an important factor in almost every trade.
If we at Base Camp Trading found that MACD worked better than MQ Momentum, we'd be using MACD. But you'll find that it's MQ Momentum that we're using on almost every single chart we trade.