The Guppy Multiple Moving Average (GMMA) is a technical indicator that identifies changing trends by combining two groups of moving averages with differing time periods. The term gets its name from Daryl Guppy, an Australian trader who is credited with its development.
The Guppy Multiple Moving Average is created using two sets of moving averages–
- Short-term: The first set of moving averages have a relatively brief timeframe and are used to assess short-term trading activity. The number of days used in these moving averages are usually 3, 5, 8, 10, 12, or 15.
2. Long-term: The second set of moving averages use extended time periods and are used to assess long-term investor activity. The number of days utilized in these moving averages are usually 30, 35, 40, 45, 50, or 60.
These twelve moving averages are all plotted on a chart where traders can check out fractal repetitions. In particular, traders check out the connection between the 2 sets of moving averages to work out if the short-term trading outlook aligns with the long-term investment outlook.
By watching the varied moving averages, traders can quickly determine where the short- and long-term sentiment dwell reference to one another . A sideways movement in the short-term moving averages is put into context by the long-term moving averages that show the prevailing trend.
Using the Guppy Multiple Moving Average:
The Guppy Multiple Moving Average can be used to identify changes in trends or gauge the strength of the current trend.
Trend Strength: The degree of separation between the short- and long-term moving averages are often used as an indicator of trend strength. If there is a wide separation, then the prevailing trend is strong, and the other way around.
Trend Reversal: The convergence and crossover of the short- and long-term moving averages represent trend reversals. If the short-term crosses above the long-term moving averages, then a bullish reversal has occurred, and vice versa.
Traders should use the Guppy Multiple Moving Average in conjunction with other technical indicators to maximize their odds of success. For example, traders might check out the Relative Strength Index (RSI) to verify whether a trend is getting top-heavy and poised for a reversal or check out various chart patterns to work out an entry or exit extra point a GMMA crossover.