Moving Average Ribbon: Trend Strength
CuriousFolk
CuriousFolk
A Moving Average Ribbon is a series of moving averages of different lengths plotted on the same chart. The interaction between these lines provides insight into the trend's strength.
Reading the Ribbon
- Expansion: When the MAs spread apart (fan out), the trend is strong.
- Contraction: When the MAs come together, the trend is weakening or consolidating.
- Twist: When short-term MAs cross long-term MAs, a trend reversal is likely.
Trend Following Data
Using ribbons to stay in trades longer during strong trends.
| Trend Type | Ribbon Behavior | Avg. Duration | Total Return |
|---|---|---|---|
| Strong Bull | Wide Expansion | 4 Months | +45% |
| Weak Bull | Narrow/Mixed | 1 Month | +5% |
| Choppy | Frequent Twists | - | -8% |
The ribbon helps traders avoid getting shaken out of profitable trades by minor pullbacks.