GUPPY MULTIPLE MOVING AVERAGE. This indicator was developed by Daryl Guppy It is fully explained in TREND TRADING Captures the inferred behaviour of traders and investors by using two groups of averages Uses fractal repetition to identify points of agreement and disagreement which precede significant trend changes. Applied to understand the nature and character of the trend Used to assess the degree and extent of trading activity Excessive trading activity can destabilise strong trends Trend analysis enables more effective selection of appropriate trading strategies such as breakout, trend continuation etc Can be applied to long side and short side trading Can be applied to intraday trading Also used for longer term investment style analysis. Join established trends at points of price weakness. Join established trends breaking to new highs. Trade breakouts using rally dips and rebounds. Trade downtrend rallies as rallies rather than trend breaks. Recognise trend breaks as they develop. Degree and nature of separation in the long term group define trend strength and weakness. Degree and nature of separation in the short term group define the nature of trading activity. Degree and nature of separation between the two groups of moving averages define the character of the trendpression shows agreement on price and valuepression of both groups at the same time indicate major re-evaluation of stock and potential for a trend change. Trade in the direction of the long term group of averages. The relationships between the groups provide the necessary information about the nature and character of the trend. Do not use as a moving average crossover tool. Enables effective analysis of the trend environment. Improves selection of the appropriate trading tactics. Better understanding of trend strength. Effective evaluation of unusual price movements, such as dips and spikes. Effective understanding of trading activity and behaviour. Not effectively applied to trend less stocks. Cannot be applied to all trending stocks. D o not use as a moving average crossover signal. See how some FX traders are using the GMMA. Guppy Multiple Moving Average - GMMA. DEFINITION of Guppy Multiple Moving Average - GMMA. An indicator used in technical analysis to identify changing trends The technique consists of combining two groups of moving averages with differing time periods. One set of moving averages in the Guppy multiple moving average GMMA has a relatively brief time frame and is used to determine the activity of short-term traders The number of days used in the set of short-term averages is usually 3, 5, 8, 10, 12 or 15.The other group of averages is created with extended time periods and is used to gauge the activity of long-term investors The long-term averages usually use periods of 30, 35, 40, 45, 50 or 60 days. BREAKING DOWN Guppy Multiple Moving Average - GMMA. The relationship between the two sets of moving averages is used by traders to determine if the outlook of short-term traders aligns with investors who have a longer-term outlook. Changing trends are identified when the two groups of moving averages intersect A bullish trend is present when the short-term moving averages are above the long-term averages Conversely, a bearish trend occurs when the short-term averages are below the long-term averages. This term gets its name from Daryl Guppy, an Australian trader who is credited with its development. MetaTrader Expert Advisor. Using the Guppy Multiple Moving Average GMMA Indicator. One of the most frustrating things about constructing a trading system can be the absolute freedom to use whatever indicators and values you like. While this can initially sound positive, the virtually limitless combinations of variables can become quite overwhelming For example, if you like the concept of the SPY 10 100 SMA Long Only System that I covered, you can implement it using any two simple moving averages you like, but which two should you use. The GMMA Indicator. The Guppy Multiple Moving Average GMMA Indicator provides an interesting alternative to using any variable you like Developed by Australian trader Daryl Guppy, the GMMA implements 12 different exponential moving averages EMAs in an effort to analyze a market s behavior on multiple levels. Guppy groups the EMAs into two categories The first six are considered short-term and the other six are considered long-term The short-term EMAs used are 3, 5, 8, 10, 12, and 18 The long-term EMAs used are 30, 35, 40, 45, 50, and 60.The long-term EMAs represent the interests and behaviors of investors that have taken a long-term approach to a given market The short-term EMAs represent traders, or speculators, who are attempting to capture short-term profits. GMMA Crossover Systems. The simplest method for using the Guppy Multiple Moving Average indicator is to trade a basic moving average crossover system using all twelve of the GMMA EMAs This system would buy when all of the short-term EMAs cross above all of the long-term EMAs, and sell when the short term EMAs cross below the long-term EMAs. Guppy has suggested that this system could be programmed into your trading software by tracking the sum of the six short-term EMAs against the sum of the six long-term EMAs When the sum of the short-term EMAs crosses above the sum of the long-term EMAs, a buy signal would be generated. GMMA Trend Strength. Another application of the GMMA indicator is using it to analyze the strength of a current trend, or to target additional entry points within a trend This can be done by analyzing how the different EMAs interact with each other. Both the long-term and short-term trends are seen as stable when each of their EMA lines are separated by a uniform distance If the six long-term EMAs begin to flatten, the long-term trend has become vulnerable If the short-term EMA lines begin to separate further and further from each other, the market is likely experiencing a bubble situation and traders should be cautious. GMMA Examples. Looking at the GMMA lines on the current chart of the SPY, we can see a number of these principles in action Notice how tight the long-term EMAs were trading with respect to each other in November and December of last year when the short-term lines crossed through them This was the start of the new uptrend. Then, those long term EMAs expanded with respect to each other as the uptrend progressed The long term EMAs traded tighter again at the end of June, indicating weakness, but have since spread further apart. It is also interesting to note that at each of the relative highs and lows, the fastest short term EMAs opened bigger gaps over the slightly slower short term EMAs This can be seen at the low point at the end of November, and at the relative high in the middle of May. Trading the crosses of the long-term and short-term lines would have established a long position in December that would have lasted all the way through June, locking in most of this year s profitable trend After a few choppy weeks, the uptrend resumed at the beginning of July and would currently be holding a long position. Trading the GMMA indicator on the FXI chart would have resulted in a few more signals this year Almost all of them would have resulted in profitable trades. The long position signaled in December would have retained most of its profits when it was sold in February Then, a short position established at the end of February would have ended profitably at the end of April. The long position triggered in May would have been sold at close to break-even, but the short position signaled in June would have turned a profit when sold in July.
No comments:
Post a Comment