I like GMMA for it simplicity and possibilities it gives. It was created by an Australian trader. Name stands for Guppy Multiple Moving Averages. It is basically two sets of moving averages:
- 5, 8, 10, 12, 15
- 30, 35, 40, 45, 50, 60
I use expotential averages, I also add to this set 100 and 200 averages. You can join it with other indicators. I like to use it with trend lines and, surprise, with Fibonacci.
Lets jump to the examples and check how we can use it in long term trading.
It is always good to draw trend lines. This can be very helpful in opening trades like on weekly chart below:
We saw a signal on MACD but price was below resistance line. After it breakout above resistance we saw that it started to work as support and buyers came in. This was the best place to enter long.
On weekly chart below we can clearly see that for over a year price was trapped below resistance line and above 100 and 200 averages. Finally, bulls managed to breakout above resistance line and nice uptrend began. Check also how blue and red averages reacted. They started to get wider and in a trend there is a bigger distance between blue and red averages.
On many times during a correction longer averages (so the red ones) will work as support. In this example we have a support from red averages and resistance from trendline.
GMMA works great combined with Fibonacci. We have a good picture of trend and current situation. It is easier to spot ABC moves. One thing – sometimes at first move AB will not look so great or even correct. Remember, you can always wait. In example below we saw that later blue averages went over a red ones and that during corrections red averages worked as support. You could enter on breakout above B line or after signal from MACD. Move ended little above 138.2% extension line.
Range markets are, as always, hard to trade. Look at blue and red averages. They are very thin. When you see or suspect range market, draw a support and resistance line and wait. In the example below range move lasted for few years, but eventually price broke above resistance and this was a start of bigger move.
On monthly chart below you can see that price was trapped below resistance line and above red averages (which were a support). Later in 2012 there was a long breakout and price started to move higher up to 600$.
It is good to observe how price reacts with averages. Lets start from left side of chart below. After range move there was a long breakout which was a start of very strong uptrend. Notice that during move up blue 30 average always worked as support. When it failed to do so around 158$, this was a signal to exit. We could reenter long trade when price forced resistance at 168$. Trading does not have to be always complicated, sometimes you just have to observe what price is doing.