What is a moving average ribbon?
A ribbon plots anywhere from three to a dozen averages of one type, usually EMAs, with evenly spaced lengths such as 10, 20, 30, 40, 50 and 60, or a slower set that ends at the 200-day moving average. Because each line lags by a different amount, the gaps between them show what one line cannot: how fast and how steadily price is moving away from its recent past. Which type you use matters less than keeping it the same; types of moving averages compares them.
TradingView’s built-in Moving Average Ribbon draws up to four averages, each set to SMA, EMA, SMMA (RMA), WMA or VWMA. For six or more lines, add the moving average indicator several times or use a community script with more lines.
- Moving average ribbon
- Several moving averages of one type and different lengths plotted together, read by their order, spacing and slope rather than by single crossings.
How to read a ribbon: expanding, compressing and twisting
Read three things, all visible at a glance. Each comes from the same idea as one average’s slope, explained in moving averages explained, repeated across several speeds:
- Order and slope: in an uptrend the shortest line is on top and the longest at the bottom, all rising; in a downtrend the order flips. A mixed order means no clean trend.
- Expanding: the gaps widen as price pulls away from older prices, which is what a strong, steady trend looks like. In the drawing at the top, the hypothetical ribbon widened to 9.4% of price during the advance.
- Compressing: the lines squeeze together, in a sideways range (0.3% of price in the drawing’s opening range) and when a trend pauses (1.9% at the top). A squeeze is a question, not a direction.
- Twisting: the short lines cross through the long ones and the old order breaks. It can be the start of a new trend or just a deep pullback, so it needs confirmation from price.
The Guppy multiple moving average (GMMA)
Daryl Guppy’s multiple moving average splits the ribbon in two. A short-term group of six EMAs, usually 3, 5, 8, 10, 12 and 15, stands for the inferred behaviour of traders; a long-term group, usually 30, 35, 40, 45, 50 and 60, for investors. Guppy reads the spacing inside and between the groups: separation in the long group shows the strength of the trend, compression of one group shows agreement on price, and compression of both groups at the same time points to a major re-evaluation and a possible change of trend.
Two of his rules are worth copying even if you never use the indicator: trade in the direction of the long-term group, and do not use the GMMA as a moving average crossover tool. In the drawing below, a hypothetical XYZ pullback squeezed the short group to 2.1% of price and dipped it into the top of the long group, while the long group stayed 3.7% wide and kept rising: the trend held. Near the end, both groups squeezed together, to 0.3% and 1.7%, and the short group crossed below: the re-evaluation came before the decline.
- Guppy multiple moving average (GMMA)
- Daryl Guppy’s indicator of two groups of six EMAs, a short-term group for traders and a long-term group for investors, read by the spacing within and between the groups.
Triple moving average crossover strategy: 4/9/18 and 5/10/20
The triple crossover is the smallest ribbon: a fast, a medium and a slow average. Common sets are 4, 9 and 18 days and 5, 10 and 20; they are examples of fast sets for daily charts, not winners, and best moving average settings explains why no set is best. The usual rules:
- Aligned up: fast above medium above slow, and all three rising. Some traders buy the first bar where this is true; others wait for the first pullback after it.
- Warning: the fast line crosses below the medium one, and the trend is pausing or ending.
- Aligned down: the order flips and all three fall.
- Flat and tangled: a range, where every cross is close to a coin toss. Stand aside.
- Triple moving average crossover
- A trend rule with a fast, a medium and a slow average, such as 5, 10 and 20: bullish when the three are stacked in that order and rising, bearish when the order flips.
A worked example: buying a pullback after the ribbon lines up (hypothetical)
Hypothetical XYZ, daily chart, with EMAs of 5, 10 and 20 days, as drawn below. After a month-long base, the three lines line up with XYZ at $40.17: 5 above 10 above 20, all rising. Buying right there with a stop under the base low of $39.09 would risk $1.18 a share, so the plan waits for a pullback.
XYZ closes below the 5 EMA five sessions in a row; the 5 EMA even dips a cent under the 10, the kind of twist that turns out to be a pullback. The low of $41.33 pokes just under the 20 EMA, but no close does. Then a close of $41.77 is back above the 5 EMA with the three lines in order again: buy at $41.77, with a stop $0.10 under the pullback low at $41.23, a risk of $0.54 a share. With 1% of a $20,000 account at risk, $200 ÷ $0.54 = 370 shares, the math the position size calculator does.
The exit rule is the warning cross. XYZ reaches a high of $44.04, about 4.2R, but two sessions later the 5 EMA crosses below the 10 and the trade exits at the close, $42.82: +$1.05 a share, +1.9R, or $388.50. Waiting for the pullback cut the risk per share by more than half; the lagging exit gave back over half of the best open profit. A different exit, such as a target at 2R or a trailing stop, would change the second number, not the first.
The limits: lag, whipsaw, and why more lines are not more information
Every line in a ribbon is built from the same closes, so ten averages do not give ten opinions; they give one opinion drawn at ten speeds. A ribbon makes trend and range easier to see, but it cannot turn earlier than its fastest line, and its slowest line confirms a turn long after it happened.
It also whipsaws. In a sideways market the lines tangle and cross constantly, and a twist that looks like a reversal is often a deep pullback, as on the GMMA pullback above. Treat the ribbon as context for a plan with a level, a stop and a size, as in the pullback trading strategy, and do not tune its lengths until the past looks perfect; backtest overfitting shows why that fails.