Finding Optimal Parameter Values for the MACD Indicator: Evidence From the Japanese Nikkei 225 Futures Market Using a New Methodology

Abstract

This paper explores: (1) what parameter values are most often used to optimize the Moving Average Convergence Divergence (MACD) trading system for the Japanese Nikkei 225 futures market; and, (2) the characteristics of good-performing models with the optimized parameter values. To accomplish this purpose, this paper presents a new methodology to find the three optimal parameter values of the MACD trading system; this approach systematically examines specific ranges of optimal parameter values. Evidence from the Japanese futures market demonstrates the validity of this new methodological approach. From this, we find that for the Japanese market the technical trading system is most often optimized by three parameter values within three specific ranges over the last 11 years (2011–2021). These optimal value combinations have a unique characteristic form. These findings give insightful and broader perspectives about the market. This issue, methodology and the results have not been discussed in the existing literature. This paper also considers how the models with optimal parameter values performed during the pandemic period (2020–2021).