Using Multiple Moving Averages by Daryl Guppy
Moving averages, familiar to every technical trader, are used by most technicians to identify important trends. Here's a unique twist on using multiple moving averages as an early warning of trend reversals.
Technical analysis is an adaptive process, pressing at the edges of possibility and developing new approaches from ideas glimpsed in passing. The multiple moving average (MMA) is an indicator developed from one such encounter. It uses core information generated from multiple time frames to capture and understand a concept of market dynamics rather than specific value readings.
As part of her search for high-probability swing trading points, technical trader Linda Bradford Raschke did some work with momentum-based oscillators to identify negative feedback setups. This was one of several steppingstones toward developing some solutions applicable to swing trading, fast-moving commodity markets, and discussed in her work Street Smarts. Although her focus was on the relationship between range and momentum as a way of identifying the start of positive feedback loops, an observation about contraction points tripped off a series of associated thoughts for me.