MA Bands

Overview

Moving Average Bands consist of a moving average (MA) and two lines or 'bands' that are spaced by a certain number of a percentage of the MA - or a certain ATR value away from the MA.

Interpretation

The Moving Average Bands are interpreted as follows:

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

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

Indicator Triggers:

Price cross up/down the MA Bands:

We want to short when the price cross up the MA upper band.
Short signal is triggered just after the price crossed up and candle closed above the band.

Price touch up/down the band:

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

MA Bands distance % / ATR:

You can trade a specific distance (in % or ATR) of the price against the lower, upper or middle band.

Place a short signal as soon as the Upper band is under the price at a distance between 1 and 4% or 1 and 4 ATR.
The upper band enter the zone distance of [1%-4%] away from the price, 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

The touch band trigger considers the value of the MA band line at the close of the previous candle (since the current value is not known, as it has not closed yet).

A long signal will be triggered if price touch down lower MA Band.
A long signal is triggered as price touched down lower MA band.

Notes :

  • Choose the right moving average type: Common types of moving averages include simple moving average (SMA), exponential moving average (EMA), and 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 (bands distance): 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 lead to more false signals, while narrower bands provide fewer signals but are more reliable.

  • MA Band indicator can give you a lot of triggers especially in low timeframes, a good combination to it is volatility indicator such as ATR in order to filter which trade is good to take or not.

Last updated