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The Guppy Multiple Moving Average is a technical analysis trading indicator developed by Daryl Guppy and explained in his Trend Trading book. The Guppy MMA uses multiple exponential moving averages to determine whether outlook of short-term traders agrees with the outlook of longer-term traders or investors and thus identifies change in trends. The Guppy MMA can be applied to any market (Stock, Forex, ETF or Futures markets).
The Guppy Multiple Moving Average indicator combines two sets of moving averages with different periods or time frames. The first set of moving averages in the GMMA uses a short time frame to track the trading activity of short-term traders. The second set of moving averages in the GMMA uses a longer time frame to track the trading activity of long-term traders.
Time frames or periods of 3, 5, 8, 10, 12 and 15 days are generally used for the first set, while periods of 30, 35, 40, 45, 50 and 60 days are used for the second set.
The separation of the long and short-term trader outlooks is one of the main advantages of the Guppy MMA indicator. The intersection between the two groups of moving averages indicates that a change in the trend occurred. The trend is bullish when the first set of moving averages, the short-term ones, are above the long-term averages, and it is bearish when the short-term moving averages are below the long-term averages.
However, the intersection between these two sets is not as important as the relationship between them. Good trading opportunities are signaled by the GMMA when the two sets of moving averages compress at the same item, which result in an increase in the price volatility.
Because the GMMA indicator uses moving averages, which are generally used as trend following indicators, it is best suited for trending stocks.
Here are the main advantages and disadvantages of the guppy multiple moving averages:
- The gmma guppy or gmma indicator allows better understanding of the trend strength
- It allows better analysis of the trading activity and the trend environment
- Do not work for trendless stocks or assets
- It has the same problems as the moving average (lag)
Here is the Guppy Multiple Moving Average formula: (There is nothing to download)
// First exponential moving average of the gmma guppy
guppy0= ema( close, 3 );
guppy1= ema( close, 5 );
guppy2= ema( close, 8 );
guppy3 = ema( close, 12 );
guppy4 = ema( close, 15 );
// The gmma indicator is constituted of 10 emas