What is Guppy Multiple Moving Average (GMMA)?
It is a technique developed by an Australian trader named Daryl Guppy.
It is a measurement method being used for technical assessments to evaluate fluctuating trends. The method can be done by merging two sets of moving averages in the different time spans.
The first group of the moving averages in Guppy multiple moving average or GMMA has a comparatively shorter time period. It is used to identify the actions of the short-term traders. Typically, the number of days in the group of short-term averages includes 15, 12, 10, 8, 5, or 3
The second group belongs to the long-term investors. The moving averages in this group have a wider time frame. It measures the actions for the long-term players. The number of days used here is typically at 30, 35, 40, 45, 50, and 60.
How to use this method?
Both the long-term and short-term averages are used to determine the outlooks in both periods. Traders are looking at both of the sets if there certain alignments in the trend.
A fluctuating trend is analyzed by looking at the two sets if they have a certain averages that had intersected. An upward or escalating trend can be seen when a short-term moving averages mounts above the long-term moving averages. A downward or descending trend can be seen when the short-term moving averages goes under the long-term moving averages.
Syncing GMMA to Relative Strength Index
Analysts and traders like to use the GMMA indicator because it can be applied in vast variety of ways. However, they should also learn how to use other tools to complement this indicator.
One of these tools is the momentum oscillators. An example of this is the RSI or Relative Strength Index. It compares the average price movements between the increasing and dropping periods for certain stocks. This is to detect and forecast conditions with oversold and overbought periods inside the price trend. Therefore, traders can use the opportunity to sell assets in the downtrend and then buy them in the uptrend once the GMMA predicts the direction of the market.