MA Bands

Overview

Moving average bands consist of a moving average (MA) and two lines or “bands” that are spaced at a certain percentage distance from the MA or a certain ATR (Average True Range) value away from the MA.

Interpretation

Moving average bands are interpreted as follows:

  • When the price approaches the upper band, the asset is considered overbought.

  • When the price approaches the lower band, the asset is considered oversold.

Indicator Triggers:

MA Bands triggers list

Price cross up/down the MA Bands:

We want to short (sell) when the price breaks above the upper moving average band.
The short signal is triggered right after the price breaks above and the candle closes above the band.

Price Touch up/down the band:

Place a short signal when the price touches the upper band.
“At the candle with the white arrow, the price touched the upper band. A short signal is immediately triggered even before the current candle closes.”

MA Bands distance % / ATR:

It is possible to trade a specific distance (in % or ATR) of the price relative to the lower, upper, or central band.

Place a short signal as soon as the upper band is below the price at a distance between 1 and 4% or between 1 and 4 ATR.
When the upper band moves away from the price by a distance of [1%-4%], a short signal is triggered.

This trigger works exactly the same way with the distance ATR. (ATR setup is in indicator settings menu)

Touch Band

This trigger works in exactly the same way with the ATR distance. (The ATR configuration can be found in the indicator’s settings menu).

A buy signal will be triggered if the price touches the lower MA band.
A buy signal is triggered when the price touches the lower MA band.

Moving Average (MA) Tips :

  • Choose the right type of moving average: The main types of moving averages include the simple moving average (SMA), the exponential moving average (EMA), and the weighted moving average (WMA). Experiment with different types to find the one that works best with your trading strategy.

  • Determine the width of the bands (distance between the bands): The width of the bands around the moving average is crucial, as it determines the level of volatility you want to capture. Wider bands capture more volatility but may result in more false signals, while narrower bands provide fewer signals but are more reliable.

  • The MA Band indicator can generate many triggers, especially over short periods. A good combination with it is a volatility indicator such as ATR to filter which trades are worth taking.

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