Moving average ribbons are a series of moving averages (MA) of various lengths that are plotted on an equivalent chart to make a ribbon-like indicator. Traders can determine the strength of a trend by watching the space between the moving averages, also as identify key areas of support or resistance by looking at the price in relation to the ribbon. The ribbons also can be wont to signal potential trend changes when the worth moves through the ribbons, or the ribbons cross one another.
Moving average ribbons are often made from six to eight moving averages of various lengths, although some trader may choose fewer or more. Traders often use an easy moving average ribbon that’s set at 10-period intervals, like 10-, 20-, 30-, 40-, 50-, and 60-period moving averages. The interval doesn’t got to be 10-periods, it might be five, or 15, the other interval.
The responsiveness of the indicator are often adjusted by changing the amount of your time periods utilized in the moving averages, or by changing the sort of moving average from a simple moving average (SMA) to an exponential moving average (EMA).
The fewer the amount of periods wont 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 spotlight major turning points within the asset.
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 worth is below the MAs, or a minimum of most of them, and therefore the MAs are angled downwards, it helps to verify a falling price.