Moving Average Ribbons

The Moving Average Ribbon (MAR) is created by combining 10 distinct moving averages (MAs) that capture a variety of time cycles. These MAs are typically divided into two groups:

  • Short-Term Group (Speculators/Short-Term Traders): Uses periods like 4, 7, 11, 14, and 17.
  • Long-Term Group (Investors/Long-Term Traders): Uses periods like 30, 35, 40, 45, and 50.

Trading Signals and Conditions

The MAR generates several key signals based on the alignment and proximity of the short-term and long-term groups.

1. Strong Reversal Signals (Narrow Ribbon)

These signals occur when the ribbon is narrow, indicating consolidation prior to a strong move.

Strong Bullish Reversal

  1. Crossover: All short-term MAs cross from below to above all long-term MAs.
  2. Alignment: Short-term MAs are positively aligned (4 period > 7 period > 11 period > 14 period, and so on).
  3. Ribbon Width: MAs are close together, forming a narrow ribbon.

Execution: Entry is activated above the high of the signal candle. Stop loss is placed below the MAR.

Strong Bearish Reversal

  1. Crossover: All short-term MAs cross from above to below all long-term MAs.
  2. Alignment: Short-term MAs are negatively aligned (4 period < 7 period < 11 period < 14 period, and so on).
  3. Ribbon Width: MAs are close together, forming a narrow ribbon.

Execution: Entry is activated below the low of the signal candle. Stop loss is placed above the MAR.

2. Weak Reversal Signals (Wide Ribbon)

These signals occur when the ribbon is wide, suggesting less immediate momentum.

Weak Bullish Reversal

  1. Crossover: All short-term MAs cross from below to above all long-term MAs.
  2. Alignment: Short-term MAs are positively aligned.
  3. Ribbon Width: MAs are far from each other, forming a wide ribbon (weak signal).

Execution: Entry is activated above the high of the signal candle. Stop loss is placed below the MAR.

Weak Bearish Reversal

  1. Crossover: All short-term MAs cross from above to below all long-term MAs.
  2. Alignment: Short-term MAs are negatively aligned.
  3. Ribbon Width: MAs are far from each other, forming a wide ribbon (weak signal).

Execution: Entry is activated below the low of the signal candle. Stop loss is placed above the MAR.

3. Alignment Signals (Trend Continuation)

Bullish Alignment

  1. Position: All short-term MAs are above all long-term MAs.
  2. Alignment: All short-term MAs are positively aligned.
  3. Ribbon Width: MAs are near each other, forming a narrow ribbon.

Execution: Entry is activated above the high of the signal candle. Stop loss is placed below the MAR.

Bearish Alignment

  1. Position: All short-term MAs are below all long-term MAs.
  2. Alignment: All short-term MAs are negatively aligned.
  3. Ribbon Width: MAs are near each other, forming a narrow ribbon.

Execution: Entry is activated below the low of the signal candle. Stop loss is placed above the MAR.

4. Knot Signal (Consolidation/Expected Breakout)

  1. Condition 1: Extreme consolidation of all 10 moving averages in one area.
  2. Condition 2: Sideways consolidation after the knot.

A volatile breakout is expected, but the direction is unknown. Traders often "straddle" the market:

  • Buy Order: Placed above the consolidation area, with a stop loss below it.
  • Sell Order: Placed below the consolidation area, with a stop loss above it.

Note: Entry of one trade implies cancellation of the opposing order. Some traders use the short-term MAs to speculate on the breakout direction.

5. Waterfall Exit Signals (Trend Exhaustion)

Bullish Waterfall Exit (End of Bullish Wave)

  1. Position: All short-term MAs are above all long-term MAs.
  2. Alignment: All short-term MAs are positively aligned.
  3. Exit Trigger: The 4-period MA crosses below the 7-period and 11-period MAs.

Execution: Exit long positions below the low of the signal candle.

Bearish Waterfall Exit (End of Bearish Wave)

  1. Position: All short-term MAs are below all long-term MAs.
  2. Alignment: All short-term MAs are negatively aligned.
  3. Exit Trigger: The 4-period MA crosses above the 7-period and 11-period MAs.

Execution: Exit short positions above the high of the signal candle.

Indicator Monitoring and Usage

Signal Visualization

  • When a signal is identified, a circle or arrow (e.g., green for bullish reversal, red for bearish waterfall) appears on the chart.
  • Further signal information is available in the monitor panel. Clicking the envelope icon opens an additional panel with details.
  • A weak bullish reversal suggests opening new long positions and exiting remaining short positions.
  • A bullish alignment suggests continuation of the upwards move. The bullish trend is assumed active as long as price remains above the long-term MA group.

Indicator Settings and Configuration

To access settings, right-click on the chart and select Indicator List, then choose the Avromis ribbon and go to the Inputs tab.

  • Language: Can be changed via a drop-down menu.
  • Scanner Mode: Available in the advanced version; scans all securities in the Market Watch window for active signals across enabled time frames.
  • Time Frames: The six time frames displayed in the Monitor Panel can be customized.
  • Panel Dimensions: Height, width, and column width of the monitor panel are adjustable.
  • Indicator Depth: Defines the number of candles the indicator is applied to (e.g., 150 means the ribbon is visible over the last 150 candles).
  • Signal Duration: How many candles the signal arrow/circle remains visible (e.g., input of 2 means removal after two candles).
  • Calculation Type: Options include Simple, Exponential, Smoothed, and Linear Weighted moving averages.
  • Periods and Color: Periods and colors for each individual MA can be adjusted, including selecting distinct bullish and bearish colors.
  • Visualization: Ribbon line visualization can be adjusted.
  • Narrow Percentage: Affects the sensitivity used to define wide or narrow ribbons, thereby impacting signal strength.

Using Scanner Mode

When enabled, the scanner identifies active signals across enabled time frames for all securities listed in the Market Watch window.

Tip: To achieve faster scanning times, reduce the number of securities in the Market Watch window.

Clicking the envelope next to a signal in the scanner switches the chart to the time frame corresponding to that signal.

Detailed Summary

The Moving Average Ribbon (MAR) is a technical analysis tool composed of 10 distinct moving averages (MAs) grouped into short-term (speculative) and long-term (investor) periods. The MAR generates various trading signals based on the crossover, alignment, and width of these two groups. Key signals include Strong Reversals (narrow ribbon/consolidation), Weak Reversals (wide ribbon), Alignment Signals (trend continuation), the Knot Signal (extreme consolidation expecting a volatile breakout), and Waterfall Exit Signals (trend exhaustion). The indicator offers monitoring panels, visualization tools, and an advanced Scanner Mode to identify active signals across multiple securities and time frames, with extensive configuration options for periods, calculation types, and sensitivity.

Key Takeaways

  • The Moving Average Ribbon (MAR) uses 10 moving averages divided into short-term (4, 7, 11, 14, 17 periods) and long-term (30, 35, 40, 45, 50 periods) groups.
  • Strong Reversal Signals occur when short-term MAs cross the long-term MAs while the ribbon is narrow, indicating prior consolidation.
  • Weak Reversal Signals occur during similar crossovers, but the ribbon is wide, suggesting less immediate momentum.
  • Alignment Signals confirm trend continuation: Bullish requires short-term MAs above long-term MAs and positive alignment; Bearish is the inverse.
  • The Knot Signal indicates extreme consolidation of all 10 MAs, predicting a volatile breakout, often leading traders to "straddle" the market (placing buy and sell stop orders).
  • Waterfall Exit Signals denote trend exhaustion and trigger position exits (e.g., Bullish exit occurs when the 4-period MA crosses below the 7- and 11-period MAs).
  • Signal strength is determined by Ribbon Width: narrow ribbons suggest stronger potential moves due to consolidation.
  • The indicator includes a Scanner Mode for advanced users to monitor active signals across multiple securities and time frames simultaneously.
  • Users can customize the Calculation Type (Simple, Exponential, Smoothed, Linear Weighted) and the Narrow Percentage, which defines the ribbon sensitivity.