Malama's big MACD

Purpose: Malama's Big MACD is a multi-faceted Pine Script indicator designed for traders on short timeframes (1-5 minute charts) to identify high-probability trading opportunities. It combines a Stochastic Price Predictor (SPP) with a comprehensive set of technical indicators, including MACD, RSI, moving average crossovers, ATR, volume spikes, and a custom JKH RSI, to generate robust buy and sell signals. The indicator aims to solve the problem of filtering out market noise in fast-moving markets by integrating probability-based predictions with traditional technical analysis, providing traders with clear entry/exit signals, trend visualization, and risk management levels.
Originality and Usefulness
This script is a unique mashup of a Stochastic Price Predictor (SPP) and a comprehensive indicator suite, tailored for short-term trading. The SPP uses a Monte Carlo simulation combined with ATR and Stochastic RSI to forecast price movements, while the comprehensive indicator suite leverages MACD crossovers, RSI overbought/oversold conditions, moving average crossovers, volume spikes, and a custom JKH RSI for confirmation. Unlike standalone MACD or RSI indicators available in TradingView’s public library, this script’s originality lies in its hybrid approach, blending probabilistic forecasting with multiple confirmatory signals to enhance reliability. The integration of user-defined sentiment input and customizable risk management levels further differentiates it from generic open-source alternatives, making it particularly useful for scalpers and day traders seeking precise, actionable signals.
How It Works
The script operates in two primary modules: the Stochastic Price Predictor (SPP) and the Comprehensive Indicator Suite, which work together to generate and confirm trading signals. Signal strength is calculated to quantify the confidence of bullish or bearish conditions.
Stochastic Price Predictor (SPP):
Core Logic: The SPP forecasts price movements using a Monte Carlo simulation based on historical returns, ATR-based volatility, and Stochastic RSI filtering. It calculates the probability of price reaching a user-defined target move (default: 0.3%) within a specified forecast horizon (default: 3 bars).

Components:
ATR and Volatility: ATR (Average True Range) is calculated over a user-defined lookback period (default: 5) and scaled by a volatility factor (default: 1.5) to estimate price volatility. A volatility ratio (current volatility vs. average) filters out signals during extreme volatility (>2x average).

Stochastic RSI: A 7-period RSI is smoothed into a Stochastic RSI (5-period stochastic, 2-period SMA) to identify overbought (>85) or oversold (<15) conditions, preventing signals in extreme market states.

Monte Carlo Simulation: 30 price paths are simulated using a geometric Brownian motion model, incorporating drift (based on weighted moving average of returns) and volatility shocks. The simulation estimates the probability of price reaching the target move up or down.

Signal Generation: A buy signal is triggered if the probability of an upward move exceeds the confidence threshold (default: 65%) and the market is not overbought, with volatility within limits. A sell signal is triggered similarly for downward moves.

Purpose: The SPP provides a probabilistic framework to anticipate short-term price movements, reducing reliance on lagging indicators.

Comprehensive Indicator Suite:
Core Logic: This module combines multiple technical indicators to confirm SPP signals and generate independent signals based on momentum, trend, and volume.

Components:
MACD: Uses fast (5-period) and slow (13-period) EMAs to calculate the MACD line, smoothed by a 5-period signal line. A crossover above a threshold (default: 0.0001) indicates bullish momentum, while a crossunder signals bearish momentum.

RSI: A 14-period RSI identifies overbought (>70) or oversold (<30) conditions to filter signals.

Moving Average Crossovers: Fast (5-period) and slow (20-period) EMAs determine trend direction. A bullish crossover (fast > slow) supports buy signals, while a bearish crossover (fast < slow) supports sell signals.

Volume Spikes: Volume exceeding 2x the 50-period average signals significant market activity, enhancing signal reliability.

JKH RSI: A fast 3-period RSI with custom overbought (>80) and oversold (<20) levels provides additional confirmation, reducing false signals in choppy markets.

Sentiment Input: A user-defined sentiment score (-1 to 1) adjusts signal strength, allowing traders to incorporate external market bias (e.g., news or fundamentals).

Signal Generation: A buy signal requires a bullish MACD crossover, RSI oversold, bullish MA crossover, non-overbought JKH RSI, and neutral/positive sentiment. A sell signal requires the opposite conditions.

Signal Strength Calculation:
Logic: Combines SPP probability, RSI deviation, and MACD strength, weighted at 50%, 30%, and 20%, respectively. Sentiment input scales the final strength (0–100).

Formula:
Bullish strength = min(100, (50 * |prob_up - prob_down| / 100 + 30 * |RSI - 50| / 50 + 20 * |MACD_line| / (0.1 * ATR)) * (1 + max(0, sentiment)))

Bearish strength is calculated similarly, using the absolute negative sentiment.

Purpose: Quantifies signal confidence, helping traders prioritize high-probability setups.

Strategy Results and Risk Management
While the script is primarily an indicator, it provides implied trading signals that assume realistic trading conditions:
Assumptions: Signals are designed for short-term trading (1-5 minute charts) with a minimum of 100 trades for statistical significance. The script assumes typical commission (e.g., 0.1% per trade) and slippage (e.g., 0.05%) for liquid markets. Risk per trade is implicitly capped via ATR-based stop-loss levels (2x ATR below/above entry for buy/sell).

Default Settings:
Lookback (5), volatility factor (1.5), and forecast horizon (3) are optimized for short timeframes.

ATR-based stop-loss and profit target levels (2x ATR) provide a risk-reward ratio of approximately 1:1.

Confidence threshold (65%) balances signal frequency and reliability.

Customization: Traders can adjust the ATR multiplier for stop-loss/profit targets or modify the confidence threshold to increase/decrease signal frequency. Lowering the target move (e.g., to 0.2%) or shortening the forecast horizon (e.g., to 2 bars) can tighten risk parameters for scalping.

Guidance: Traders should backtest signals on their specific asset and timeframe, ensuring sufficient trade volume (>100 trades) and incorporating their broker’s commission/slippage. Risk should be limited to 5–10% of equity per trade, adjustable via ATR multiplier or position sizing outside the script.
User Settings and Customization
The script offers extensive user inputs, organized into three groups:
Stochastic Price Predictor Settings:
Lookback Period (default: 5): Controls the period for ATR and returns calculation. Shorter periods increase sensitivity.

Volatility Factor (default: 1.5): Scales ATR for volatility shocks in the Monte Carlo simulation.

Confidence Threshold (default: 65%): Sets the minimum probability for SPP signals.

Stoch RSI Overbought/Oversold Levels (default: 85/15): Filters signals in extreme conditions.

Forecast Horizon (default: 3): Number of bars for price prediction.

Target Move (default: 0.3%): Expected price movement for probability calculation.

Show Predicted Range (default: false): Toggles visibility of the 25th–75th percentile price range.

Comprehensive Indicator Settings:
RSI Length (default: 14), Overbought (70), Oversold (30): Standard RSI parameters.

ATR Length (default: 14): Period for ATR calculation.

Volume Spike Multiplier (default: 2.0): Threshold for detecting volume spikes.

Sentiment Input (default: 0.0, range: -1 to 1): Scales signal strength based on external bias.

MACD Fast/Slow/Signal Lengths (default: 5/13/5), Crossover Threshold (0.0001): Controls MACD sensitivity.

MA Fast/Slow Lengths (default: 5/20): Defines trend direction.

JKH RSI Length (default: 3), Overbought (80), Oversold (20): Fast RSI for confirmation.

Visual Settings:
Show SPP Signals (default: true): Displays SPP buy/sell labels.

Show Comp Signals (default: true): Displays comprehensive indicator signals.

Highlight Volume Spikes (default: true): Highlights bars with significant volume.

Show ATR Levels (default: true): Plots stop-loss and profit-target lines.

Impact: Adjusting lookback periods or thresholds affects signal frequency and sensitivity. For example, lowering the confidence threshold increases signals but may reduce accuracy, while increasing the volatility factor amplifies price path variability.
Visualizations and Chart Setup
The script plots clear, relevant elements on the chart to aid decision-making:
Trend Line: Plots the close price, colored green (bullish, fast MA > slow MA), red (bearish), or orange (neutral).

SPP Signals: Green "BUY (SPP)" labels below bars and red "SELL (SPP)" labels above bars when conditions are met.

Predicted Range: Optional blue step lines showing the 25th–75th percentile price range from the Monte Carlo simulation, with a semi-transparent fill.

Comprehensive Signals:
Blue upward triangles for bullish MACD crossovers, orange downward triangles for bearish crossovers.

Green circles above bars for RSI overbought, red circles below for oversold.

Green "BUY (Comp)" labels (offset by 1x ATR below) and red "SELL (Comp)" labels (offset by 1x ATR above) for comprehensive signals.

Green upward triangles for bullish MA crossovers, red downward triangles for bearish crossovers.

Volume Spikes: Yellow background highlights bars with volume >2x the 50-period average.

ATR Levels: Purple dotted lines for stop-loss (close - 2x ATR) and profit target (close + 2x ATR).

Moving Averages: Fast MA (blue, 5-period) and slow MA (red, 20-period) for trend reference.

Clarity: Only relevant elements are plotted, ensuring traders can quickly identify trends, signals, and risk levels without clutter.