Guppy Multiple Moving Average – Success in trend trading depends not only on correctly identifying the direction of the trend and catching the trend once it starts, but also on exiting as soon as possible after the trend reverses.
If you find yourself struggling with any of the above, you might want to check out the Guppy Multiple Moving Average Indicator.
Guppy Multiple Moving Average
Guppy Multiple Moving Average (GMMA), simply known as “Guppy”, is a technical indicator that identifies changes in trends, meaning it gives you an objective way to know when to enter and when to exit a trade.
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Don’t confuse “Guppy”, the indicator, with “Guppy”, the nickname for GBP/JPY. Those are two different things. This means you can trade Guppy (currency pair) with Guppy (indicator). 😂
Multiple Guppy lines help traders see the strength or weakness of a trend better than using just one (or two) EMAs.
You enter a trade when there is a trend reversal, which is indicated when one group crosses another group.
This strategy consists of combining TWO groups of exponential moving averages (EMA) with different time periods (or lengths).
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The Guppy Multiple Moving Average can be used to identify changes in trend direction or measure the strength of an existing trend.
The degree of separation between short-term and long-term moving averages can be used as an indicator of trend strength.
If there is a NARROW separation or connecting line, it indicates a weakening trend or period of consolidation.
If the short-term EMAs cross ABOVE the long-term moving averages, this is known as a bullish crossover and indicates that a bullish reversal has occurred.
T3 Guppy Multiple Moving Average Indicator No Repaint Mt4.png
If the short-term EMAs cross BELOW the long-term ones, this is known as a bearish crossover and indicates that a bearish reversal is taking place.
When the moving averages between these two groups are close and roughly parallel, it indicates that short-term market sentiment and long-term trends generally agree.
Usually, when both groups of EMAs are moving horizontally or mostly sideways and are highly correlated, it means that the price is not trending.
Looking at the chart above, notice how when the red and blue EMA groups are connected, the price has no direction, it simply moves up and down within the range.
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Current price action is more suitable for range trading. As a trend trader, it makes sense to sit back and wait for better conditions.
When all short-term EMAs cross all long-term EMAs, a new bullish trend is confirmed and a buy signal is triggered.
During a strong uptrend, when the short-term MAs move towards the long-term MAs, but do NOT cross over, and then begin to pull back higher, this indicates another continuation of the bullish trend and triggers a buy signal.
Also, after the crossover, if prices fall and then bounce off the long-term EMAs, it signals a continuation of the bullish trend and will trigger a buy signal.
Guppy Multiple Moving Average (gmma) Indicator: Trade The Trend
When all short-term EMAs cross below all long-term EMAs, it indicates a new bearish trend and triggers a sell signal.
During a strong downtrend, when the short-term MAs move toward the long-term MAs but do NOT cross over, and then begin to move lower, this indicates a continuation of the bearish trend and triggers a sell signal.
Also, after a bearish crossover, if the price rises but then bounces off the long-term EMAs, this indicates a continuation of the bearish trend and triggers a sell signal.
The above buy and sell signals should be avoided when the price and EMA are moving sideways.
Download Guppy Multiple Moving Average Afl (script)
When compression of the same group of moving averages occurs on the same candlestick, it may indicate a general trend change.
In the chart above, both sets of EMAs have become tightly compressed. Notice how the last candle opens
This can be interpreted as the price can close above the resistance level (compressed EMA).
On the next candle, the price rose which triggered a buy stop order. The previous stop sell order now becomes your initial stop loss.
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The price continues to rise. Whenever the candle makes a new higher low, you can track your stop loss and use it as a new stop loss, until you stop out.
This is because Guppy consists of exponential moving averages (EMAs), and as we mentioned in the previous lesson, EMAs are lagging indicators.
This means that waiting for the EMAs to cross can sometimes result in a late entry or exit because the price has moved too far.
With any trend-following indicator, you will always enter a trade AFTER the trend has started and ultimately exit the trade AFTER the trend has ended.
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This is why it is called a trend-following indicator. You don’t try to predict when the trend will start, you wait for it to develop first and then you just follow it.
A whipsaw occurs where there is a crossover, indicating an entry, but instead of the price moving in the expected direction, it moves back in the opposite direction, causing the EMA to cross again, indicating an exit (and a realized loss).
Although a simple indicator, the Guppy system works best when the price is in a clear trend.
No technical indicator is always correct. (If you find it, let us know.)
Template: Guppy Mma
When I thought I couldn’t take it anymore, I forced myself to continue. My success is based on persistence, not luck. The Norman Lea Guppy Multiple Moving Average (GMMA) is a technical indicator that aims to predict a potential breakout in an asset’s price. The term is named after Daryl Guppy, an Australian financial columnist and book writer who developed the concept in his book, “Trading Tactics”.
GMMA uses an exponential moving average (EMA) to capture the difference between a stock’s price and value. The convergence of these factors is associated with a significant change in trend. Guppy argues that the GMMA is not a lagging indicator, but rather an early warning of a rising change in price and value.
The formula for the Guppy indicator uses exponential moving averages (EMA). There is a short-term group of MAs and a long-term group of MAs, both of which contain six MAs each, for a total of 12. However, one can enter their desired number of periods, N, into the calculation to find each MA value.
E m a = [Closeprice – E m A p r e v i o u s or: s m a = download n where: e m a p r e v i o u s = theexPonentionOvingaVerageFromthePeviusPeriod (the a a p r e v i o u s forhefirstCalculation) multiplier = n + m simple = 1 m average numberOFperiods begin &EMA = left[text – EMA_ right]*M+EMA_\ &textbf\ &SMA = frac N text}\ \ \ &textbf\ &EMA = text &EMA_ = text\ &text SMA text EMA_ text\ &text M = frac\ &SMA = text\ &N = text\ end E M A = [ Closeprice − E M A p r e v i o u s ] ∗ m + e m a p r e v i o u s o: s m a = n sum of n closes
Trade Catcher: Gmma Guppy Multiple Moving Averages Amibroker Afl
Repeat the steps below for each MA requested. Change the value of N to calculate the EMA you want. For example, use three to calculate a three-period average, and use 60 to calculate a 60-period EMA.
The degree of separation between short-term and long-term MAs can be used as an indicator of trend strength. If there is a wide split, then the prevailing trend is strong. On the other hand, narrow separations or line crossings indicate a weakening trend or a period of consolidation.
Crossing of short-term and long-term MAs represents a trend reversal. If the short-term crosses above the long-term MA, then a bullish reversal has occurred. Conversely, if short-term MAs cross below long-term MAs, a bearish reversal occurs.
Meanwhile, when both sets of MAs move horizontally, or mostly move sideways and have a high correlation, it means that the asset lacks a price trend and therefore may not be a good candidate for a trend trade. However, these times can be good for range trading.
Guppy Multiple Mas System
GMMA can be used to identify changes in trends or measure the strength of an existing trend and is best used in conjunction with other technical indicators.
The indicator can also be used for trading signals. When the short-term group crosses above the long-term MA group, buy. When the short-term group crosses below the long-term group, sell. These
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