What Is a Moving Average Ribbon?

Moving average ribbons are a series of moving averages (MA) of different lengths that are plotted on the same chart to create a ribbon-like indicator. Traders can determine the strength of a trend by looking at the distance between the moving averages, as well as identify key areas of 澳洲幸运5开奖号码历史查询:support or resistance by🌱 lo🎃oking at the price in relation to the ribbon.

The ribbons can also be used to signal potential trend changes wheไn the price moves through the ribbons, or the ribbons cross each other.

Formula for a Moving Average Ribbon

 $\begin{aligned} &\text{Moving Average Ribbon} = \text{Multiple SMAs} \\ &\textbf{where:} \\ &\text{SMAs} = \text{Simple moving averages} \\ &\text{SMA} = \frac{ \text{Price}_1 + \text{Price}_2 + \text{Price}_3 + \cdots \text{Price}_n }{ n } \\ &n = \text{Number of periods} \\ \end{aligned}$​Moving Average Ribbon=Multiple SMAswhere:SMAs=Simple moving averagesSMA=nPrice1​+Price2​+Price3​+⋯Pricen​​n=Number of periods​

How to Calculate a Moving Average Ribbon

1. Determine how many MAs will be used.
2. Choose their lengths/lookback periods.
3. Calculate the simple moving average for each

What Does a Moving Average Ribbon Tell You?

Moving average ribbons are often made up of six to eight moving averages of different lengths, although some traders may choose fewer or more. Traders often use a 澳洲幸运5开奖号码历史查询:simple moving average ribbon that is set at 10-period intervals, su🎃ch as 10-, 20-, 30-, 40-, 50-, and 60-period moving averages. The interval doesn't need to be 10-periods, it could ꦏbe five, or 15, any other interval.

The responsiveness of the indicator can be adjusted by changing the number of time periods used in the moving averages, or by changing the type of moving average from a simple moving average (SMA) to an 澳洲幸运5开奖号码历史查询:exponential moving average (EMA).

The fewer the number of periods used to create the averages, the more sensitive the ribbon is to slight price changes. For example, a series of 5, 15, 25, 35, and 45-period moving averages will react quicker to short-term price changes than 150, 160, 170, 180-period moving averages. The 🔥latter would be favored by a longer-term investor who only wants to highlight major turning points in the asse🎶t.

When the price is above the ribbon, or at least above most of the MAs, it helps confirm a rising price trend. MAs that are angled upwards also aid in confirming an uptrend.

When the price is below t🙈he MAs, or at least most of them, and the MAs are angled downဣwards, it helps to confirm a falling price.

Special Considerations

Traders can adjust the indicator so that it provides support and resistance areas. Alter the lookback periods of the MAs so that the bottom of the ribbon, for example, provided support to a rising price trend in the past. In the future, the ribbon may act as support again. The same concept applies to 澳洲幸运5开奖号码历史查询:downtrends and resistance.

When the ribbon is expanding, that helps confirm a strengthening trend. For example, during a strong price rise, tꦅhe MAs will fan out as the shorter MAs pull away from the longer-period MAs.

When the ribbon contracts, that indicates the price has entered a 澳洲幸运5开奖号码历史查询:consolidation or pullback phase.

When the ribbons cross, that can indicate a potential trend change. Some traders may wait for all the ribbons to cross to confirm a price reversal, while others may only needꦇ to see a few of the MAs cross before taking action.

Moving Average Ribbon Example

The following chart shows an example of a moving average ribbon in the SPDR S&P 500 ETF (SPY).

In the example above, you can identify bullish or bearish trends by looking at when the indicators start to crossover lower or hig♔her, which changes their color from green to red and red to green, respectively, on this charting platform. The widening of the lines suggests that the trend's strength is increasing while narrowing lines suggest that the trend is losing its momentum.

Moving Av💜erage Ribbon vs. Guppy Multi🎉ple Moving Average

Individual traders will determine how many MAs make up their moving average ribbon, and will also determine the lookback period of those MAs. The 澳洲幸运5开奖号码历史查询:Guppy Multiple Moving Average is more str🉐uctured in that it has a set number of MAs with set lookbac𒀰k periods. While these can still be altered by the trader, the default settings for the Guppy are 12 MAs, with periods of three, five, eight, 10, 12, 15, 30, 35, 40, 45, 50, and 60.

Limitations of Using a Moving Average Ribbon

The more MAs there are on a chart, the harder it becomes to determine which ones are relevant. For example, if a trader is pri🌼marily focused on the bottom MA in a rising trend, then the other MAs are just cluttering the chart.

While ribbon contraction, crosses, and expansion can aid in assessing trend strength, pullbacks, and reversals, MAs are always lagging. This means that the price may have already moved significantly before th🦹e ribbon signals the price change.

The ribbon may provide support and resistance at times, but not at others. Also, as indicated above, one time the middle of the ribbon may provide support, while the next time it is the top or bottom of the ribbon. When support is broken, and the price has moved through all the ribbons, this would usually be considered a trend reversal, especially if the MAs have crosses each other as well, but such moves don't always result in a price reversal. The pullback may have just been deeper than the MAs, and following the pullback the original trend resumes.

Moving average ribbons are best used in conjunction with other forms of analysis, such as 澳洲幸运5开奖号码历史查询:price action, other technical indicators, and 澳洲幸运5开奖号码历史查询:fundamental analysis for longer-term traders.