Moving Average Ribbon

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DEFINITION of 'Moving Average Ribbon'

A technique used in technical analysis to identify changing trends. It is created by placing a large number of moving averages onto the same chart. When all the averages are moving in the same direction, the trend is said to be strong. Reversals are confirmed when the averages crossover and head in the opposite direction.

Moving Average Ribbon



The moving averages used in the diagram start with the 50-day moving average and increase by 10-day periods up to the final average of 200. (50, 60, 70, 80 ... 190, 200)

BREAKING DOWN 'Moving Average Ribbon'

Responsiveness to changing conditions is accounted for by changing the number of time periods used in the moving averages. The shorter the number of periods used to create the average, the more sensitive the ribbon is to slight price changes. For example, a series of 5, 15, 25, 35 and 45-day moving averages will be a better choice to find short-term reversals then 150, 160, 170, 180-day moving averages.

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RELATED FAQS
  1. What are the best technical indicators to complement a Moving Average Ribbon?

    Each of the moving averages inside of a moving average ribbon play a least a cursory complementary role for each other, smoothing ... Read Full Answer >>
  2. How do I use a Moving Average Ribbon for creating a forex trading strategy?

    The moving average ribbon can be used to create a basic forex trading strategy based on a slow transition of trend change. ... Read Full Answer >>
  3. What is a common strategy traders implement when using a Moving Average Ribbon?

    Moving averages are a trend-following tool. While this doesn't change when you plot eight of them on a price chart rather ... Read Full Answer >>
  4. Why is the Moving Average Ribbon strategy important for traders and analysts?

    Moving average ribbons plot a large number of moving averages onto a price chart, forming an extreme version of multiple ... Read Full Answer >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
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