Markets.com Logo
euEnglish
LoginSign Up

Optimizing Moving Average Ribbon Parameter Settings

Mar 21, 2024
6 min read
Table of Contents
  • 1. Choosing Appropriate Timeframes
  • 2. Timeframes for Day Traders
  • 3. Timeframes for Swing Traders
  • 4. Blending Timeframes for More Context
  • 5. Smoothing With Moving Average Order
  • 6. Tuning Upper & Lower Bands
  • 7. Summing It Up

Monochrome image capturing a hand with a pen pointing at a line graph

 

The Moving Average Ribbon couples a faster simple moving average with a slower exponential moving average into a tidy bounded indicator. 

When tuned correctly, Ribbon bands can anticipate impending support breaks and resistance tests with high accuracy - generating advanced notice of momentum shifts.

In this guide, we’ll discuss expert techniques for smoothing bands, matching relevant timeframes, setting ideal thresholds, and transforming your setup into a custom-fit trend analysis.

 

Choosing Appropriate Timeframes

Selecting suitable timeframes or intervals for calculating your Moving Average Ribbon is arguably the most important configuration decision. 

Your timeframe significantly impacts the responsiveness, smoothing, and overall relevancy of the generated Moving Average Ribbon signals.

Shorter timeframes, like 5, 10, or 15 minutes, will require the Ribbon to adhere to every minor price fluctuation closely. This provides a nuanced and detailed analysis. However, many premature or false signals often result from the Ribbon reacting to insignificant market noise.

Switching to longer time intervals has the effect of smoothing out much of this inconsequential noise for potentially higher probability signals. 

The trade-off is reduced responsiveness and a delay in signal generation. Therefore, finding the optimal balance depends greatly on your trading strategy and preferences.

 

 

Timeframes for Day Traders

Lower timeframes are most applicable for intraday traders and scalpers looking to capitalize on short-term volatility and swings. 

 

A male trader glancing at his watch while actively engaging with data and charts on a computer screen

 

Day traders aiming to capture moves within a single trading session benefit most from configuring their Moving Average Ribbon using hourly or 4-hour intervals.

The shorter duration range provides signals related to intraday price action and momentum while filtering out some noise associated with 5-15-minute charts. 

A common approach is to screen one or two-hour charts for signal generation and then drop down to 15-minute intervals for timing entry and exit executions.

Explore this recommended article: Day Trading For Beginners

Timeframes for Swing Traders

Swing traders planning to hold positions for several days to weeks require analysis to capture longer-term trend directionality. 

For swing trading strategies, utilizing the Moving Average Ribbon daily or weekly timeframes will be most appropriate for identifying reliable and sustainable breakouts with follow-through.

When managing longer-term swing trades, the daily interval Ribbon shines when observed on 1-hour charts. Keep the daily Ribbon visible to guide the overall trend while using faster hourly pricing to fine-tune entry and exit points.

Blending Timeframes for More Context

No matter if your trading strategy duration leans closer to day trading or swing trading, it is generally wise to confirm Moving Average Ribbon signals by referencing the Ribbon at the next higher interval before taking any actions.

For example, if your day trading Ribbon setup on the hourly chart is signalling a potential support break, take a moment to cross-reference what the daily interval Ribbon is showing. 

If the daily chart Ribbon shows support is still intact, it may suggest simply an intraday pullback rather than actual support failure. Blending hourly and daily Moving Average Ribbon provides more context to discern the possibility of follow-through.

This blending of timeframes significantly increases the effectiveness of trade signals and filters lower probability price moves. Patience is a virtue when the Moving Average Ribbon is utilized to maximum impact. 

Read this article for more insights: Trends in Trading Explained

 

Smoothing With Moving Average Order

All moving averages smooth data to some degree by averaging closing prices over X number of periods. But higher-order moving averages multiply this effect for a less jittery decipherable Ribbon.

The typical simple moving average (SMA) quickly responds to the latest closes. It is great for fast action but also more prone to false breaks or fakeouts. A linear weighted moving average (LWMA) adds a smoothing effect since recent data is less weighted.

Exponential moving averages (EMA) take smoothing even further by continuously compounding old prices that decay over time. The slower EMA has a delay but generates fewer premature signals. 

 

Digital artwork featuring a blue colored trading chart with a candlestick pattern trade lines graphs and asset prices

 

For reliability, use EMA Ribbons on noisier swing trading charts. Traders who need quick signals appreciate fast SMA Ribbons most.

Raise the order level as high as individual chart noise allows. Smoother setups must withstand more extreme deviations before signalling breaks. 

This article may pique your interest: Triangular Moving Average (TMA) - Smoothing Market Trends 

 

Tuning Upper & Lower Bands

The final step dials in the Ribbon bands themselves. Wider bands tolerate more variability before triggering. Tighter bands react quickly to more minor deviations. 

Set custom intervals or anchor standard deviations based on personal risk management.

Tighter 1-2 standard deviation bands provide an early heads-up on potential exhaustion moves but generate more false signals. Risk-tolerant scalpers might start here.

2-3 standard deviation Ribbons offer a balanced approach appropriate for most. These bands allow reasonable fluctuation before signalling trend shifts.

4+ standard deviation wide bands hold through volatility without many premature triggers. It is great for swing trades, but late signals with deeper pullbacks are required before acting. Consider combining wide weekly bands with tighter daily bands.

There’s no definitive perfect setting. Adjust to suit personal style and profit targets. Wider bands provide flexibility for longer holds, and tighter bands provide quick action on smaller moves.

You might also like to read: Trading Slip-ups With Moving Average Indicator

 

Summing It Up

The Moving Average Ribbon is a versatile technical analysis tool that provides traders valuable insights into market trends and potential support/resistance levels. 

Intraday scalpers may prefer faster signals from tighter bands, while swing traders can utilize wider bands on higher timeframes to focus on the bigger picture. 

No matter your strategy, blending signals across intervals, smoothing out noise with higher-order moving averages, and setting appropriate buffers will lead to more reliable signals. 

We encourage traders of all backgrounds to explore utilizing the Moving Average Ribbon as part of a complete analysis process for potentially improved timing and risk management. 

With practice, the indicator can become a trusted guide towards favourable trade opportunities.

Become a member of markets.com and leverage our advanced trading tools and resources!

“When considering “CFDs” for trading and price predictions, remember that trading CFDs involves a significant risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be considered investment advice.” 


Risk Warning and Disclaimer: This article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform. Trading Contracts for Difference (CFDs) involves high leverage and significant risks. Before making any trading decisions, we recommend consulting a professional financial advisor to assess your financial situation and risk tolerance. Any trading decisions based on this article are at your own risk.

Arianne Bonacua
Written by
Arianne Bonacua
SHARE

Markets

  • Palladium - Cash

    chartpng

    --

    -0.25%
  • EUR/USD

    chartpng

    --

    -0.17%
  • Cotton

    chartpng

    --

    0.88%
  • AUD/USD

    chartpng

    --

    -0.05%
  • Santander

    chartpng

    --

    1.65%
  • Apple.svg

    Apple

    chartpng

    --

    0.08%
  • easyJet

    chartpng

    --

    -1.45%
  • VIXX

    chartpng

    --

    -2.75%
  • Silver

    chartpng

    --

    -0.31%
Tags DirectoryView all
Table of Contents
  • 1. Choosing Appropriate Timeframes
  • 2. Timeframes for Day Traders
  • 3. Timeframes for Swing Traders
  • 4. Blending Timeframes for More Context
  • 5. Smoothing With Moving Average Order
  • 6. Tuning Upper & Lower Bands
  • 7. Summing It Up

Related Articles

Alternative to Nvidia Stock: Who Are Nvidia's Competitors?

Alternative to Nvidia Stock: Nvidia has established itself as a dominant force in the tech industry, particularly in the fields of graphics processing units (GPUs) and artificial intelligence (AI).

Frances Wang|about 21 hours ago

BNB USDT Price Prediction: Could Binance Coin Price Break $700 Resistance?

BNB USDT Price Prediction: Binance Coin (BNB) has emerged as one of the most significant cryptocurrencies in the market, driven by the growth of the Binance exchange and the expanding ecosystem around it.

Ghko B|about 21 hours ago

Types of Indices CFDs: Nikkei 225, FTSE 100 Index, US Tech 100 and more

Types of Indices CFDs: Contracts for Difference (CFDs) on indices allow traders to speculate on the performance of a group of stocks that make up a specific index.

Frances Wang|about 21 hours ago
Markets.com Logo
google playapp storeweb tradertradingView

Contact Us

support@markets.com+12845680155

Markets

  • Forex
  • Shares
  • Commodities
  • Indices
  • Crypto
  • ETFs
  • Bonds

Trading

  • Trading Tools
  • Platform
  • Web Platform
  • App
  • TradingView
  • MT4
  • MT5
  • CFD Trading
  • CFD Asset List
  • Trading Info
  • Trading Conditions
  • Trading Hours
  • Trading Calculators
  • Economic Calendar

Learn

  • News
  • Trading Basics
  • Glossary
  • Webinars
  • Traders' Clinic
  • Education Centre

About

  • Why markets.com
  • Global Offering
  • Our Group
  • Careers
  • FAQs
  • Legal Pack
  • Safety Online
  • Complaints
  • Contact Support
  • Help Centre
  • Sitemap
  • Cookie Disclosure
  • Regulation
  • Awards and Media

Promo

  • Gold Festival
  • Crypto Trading
  • marketsClub
  • Welcome Bonus
  • Loyal Bonus
  • Referral Bonus

Partnership

  • Affiliation
  • IB

Follow us on

  • Facebook
  • Instagram
  • Twitter
  • Youtube
  • Linkedin
  • Threads
  • Tiktok

Listed on

  • 2023 Best Trading Platform Middle East - International Business Magazine
  • 2023 Best Trading Conditions Broker - Forexing.com
  • 2023 Most Trusted Forex Broker - Forexing.com
  • 2023 Most Transparent Broker - AllForexBonus.com
  • 2024 Best Broker for Beginners, United Kingdom - Global Brands Magazine
  • 2024 Best MT4 & MT5 Trading Platform Europe - Brands Review Magazine
  • 2024 Top Research and Education Resources Asia - Global Business and Finance Magazine
  • 2024 Leading CFD Broker Africa - Brands Review Magazine
  • 2024 Best Broker For Beginners LATAM - Global Business and Finance Magazine
  • 2024 Best Mobile Trading App MENA - Brands Review Magazine
  • 2024 Best Outstanding Value Brokerage MENA - Global Business and Finance Magazine
  • 2024 Best Broker for Customer Service MENA - Global Business and Finance Magazine
LegalLegal PackCookie DisclosureSafety Online

Payment
Methods

mastercardvisanetellerskrillwire transferzotapay
The markets.com/za/ site is operated by Markets South Africa (Pty) Ltd which is a regulated by the FSCA under license no. 46860 and licensed to operate as an Over The Counter Derivatives Provider (ODP) in terms of the Financial Markets Act no.19 of 2012. Markets South Africa (Pty) Ltd is located at BOUNDARY PLACE 18 RIVONIA ROAD, ILLOVO SANDTON, JOHANNESBURG, GAUTENG, 2196, South Africa. 

High Risk Investment Warning: Trading Foreign Exchange (Forex) and Contracts For Difference (CFDs) is highly speculative, carries a high level of risk and is not appropriate for every investor. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. Please read the full  Risk Disclosure Statement which gives you a more detailed explanation of the risks involved.

For privacy and data protection related complaints please contact us at privacy@markets.com. Please read our PRIVACY POLICY STATEMENT for more information on handling of personal data.

Markets.com operates through the following subsidiaries:

Safecap Investments Limited, which is regulated by the Cyprus Securities and Exchange Commission (“CySEC”) under license no. 092/08. Safecap is incorporated in the Republic of Cyprus under company number ΗΕ186196.

Finalto International Limited is registered  in the Saint Vincent and The Grenadines (“SVG”) under the revised Laws of Saint Vincent and The Grenadines 2009, with registration number  27030 BC 2023.

Close
Close

set cookie

set cookie

We use cookies to do things like offer live chat support and show you content we think you’ll be interested in. If you’re happy with the use of cookies by markets.com, click accept.