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GMMA

Guppy Multiple Moving Average (GMMA) is a technical indicator developed by Daryl Guppy that uses two groups of exponential moving averages (EMA) to reveal the interaction between short-term traders and long-term investors.

To use the indicator, you need to use the GuppyMultipleMovingAverage class.

Description

The Guppy Multiple Moving Average (GMMA) consists of two groups of exponential moving averages (EMA):

  1. Short-term group (typically 3, 5, 8, 10, 12, and 15 periods) - represents short-term traders' activity
  2. Long-term group (typically 30, 35, 40, 45, 50, and 60 periods) - represents long-term investors' activity

GMMA allows visualization of the interaction between these two market participant groups and determines whether the market is in a trending or consolidation state. The indicator also helps identify moments when short-term traders begin to follow the same direction as long-term investors, which often indicates the formation or strengthening of a trend.

GMMA is particularly useful for:

  • Determining the strength and direction of the current trend
  • Identifying potential trend reversals
  • Recognizing when the market transitions from consolidation to a trend
  • Determining optimal entry points into an existing trend

Calculation

GMMA calculation involves computing two groups of exponential moving averages:

  1. Short-term EMA group:

    EMA_3 = EMA(Price, 3)
EMA_5 = EMA(Price, 5)
EMA_8 = EMA(Price, 8)
EMA_10 = EMA(Price, 10)
EMA_12 = EMA(Price, 12)
EMA_15 = EMA(Price, 15)

  2. Long-term EMA group:

    EMA_30 = EMA(Price, 30)
EMA_35 = EMA(Price, 35)
EMA_40 = EMA(Price, 40)
EMA_45 = EMA(Price, 45)
EMA_50 = EMA(Price, 50)
EMA_60 = EMA(Price, 60)

Where:

  • EMA - exponential moving average
  • Price - price (usually closing price)

Interpretation

GMMA interpretation involves analyzing both individual groups and their interaction:

  1. Group Positioning:

    • When the short-term group is above the long-term group, it indicates an upward trend
    • When the short-term group is below the long-term group, it indicates a downward trend

  2. Distance Between Groups:

    • Large distance between groups indicates a strong trend
    • Small distance or group crossover indicates a weak trend or consolidation

  3. Compression and Expansion:

    • Compression (convergence) of lines within a group indicates uncertainty and possible consolidation
    • Expansion (divergence) of lines within a group indicates trend strengthening

  4. Crossovers:

    • Short-term group crossing through long-term group from bottom to top - strong bullish signal
    • Short-term group crossing through long-term group from top to bottom - strong bearish signal

  5. Direction Changes:

    • When the long-term group begins to change direction, it indicates a significant change in long-term investor sentiment
    • Short-term group reversal without changes in the long-term group often indicates a temporary correction

  6. Optimal Entry Points:

    • After strong expansion, compression may occur, indicating a correction within the trend
    • The end of such compression (new expansion) can be a good entry point in the direction of the main trend

  7. Early Reversal Warning:

    • Short-term averages change direction first, then changes begin to appear in long-term averages
    • Crossover between groups can serve as a trend reversal confirmation

indicator_guppy_multiple_moving_average

See Also

EMA MovingAverageRibbon RainbowCharts MACD

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