Moving Average Channel

 

#movingaverage #channel #trendfollowing 

Inventor:  

A channel built from two moving averages: one on the highs and one on the lows of each bar. The upper line is the average high, the lower line is the average low, and the space between them is the market’s average bar placed on the chart. In an uptrend price walks along the upper line; in a downtrend along the lower line; the channel itself frames every pullback. 

Default period: 5, 5 (MA of highs, MA of lows) 

Price above the upper line indicates strength beyond the average high, uptrend. Price below the lower line indicates weakness beyond the average low, downtrend. Price inside the channel indicates neutral ground. 

Useful readings: 

Closes riding above the upper line: Strong uptrend, stay long 

Closes riding below the lower line: Strong downtrend, stay short 

Pullback into the channel during an uptrend: Normal dip, buying zone 

Price crossing the whole channel: Trend change in progress 

Channel sloping up with price inside: Uptrend resting, not reversing 

Flat channel with price weaving through: Sideways market, stand aside 

Objective rules: 

Bullish: Price closes above the upper channel line. 

Bearish: Price closes below the lower channel line. 

Dip buy: In an uptrend, buy when price pulls back inside the channel and closes back above the upper line 

Long exit: Price closes below the lower line 

Flat filter: Skip signals when the channel has been flat (slope under 1% in 5 bars) 

What makes it unique: 

It plots the market’s average bar – average high to average low – as a living corridor on the chart. Pullbacks into the average bar become visible, objective entry zones. 

The indicator table value in TradePoint & RZone also provides you with a list of all values of this indicator for any group of stocks. This will allow you to compare the readings of this indicator across different stocks.

This indicator is available in the System Builder on RZone & TradePoint for all charting methods. Using the system builder, you can develop various strategies based on the different conditions already present in this indicator. Additionally, it can be used with other indicators or price patterns to develop effective trading strategies. For any group of stocks and market segments, you can scan and backtest stocks based on those strategies.

Click here to learn more about the indicator.

The indicator is applicable to all types of charting. It is calculated based on the number of columns on P&F charts, bricks on Renko charts, lines on Line-break charts, candles on Heikin-Ashi charts, and lines on Kagi charts. While the formula and interpretation of the indicators remain the same, they become more dynamic on these charts.