Understanding the Guppy multiple moving average (GMMA)

Benjamin Graham once said, ‘In the short run, the market is a voting machine, but in the long run it is a weighing machine.’ Traders know this well: short-term moves show popularity, but long-term trends reveal real strength. The Guppy multiple moving average (GMMA) strategy bridges these perspectives. It layers fast EMAs that capture trader activity with slower EMAs that track investor behaviour, giving a clear view of both sentiment and trend. The result: the GMMA indicator tool, which shows the big picture while capturing key details. This makes it easier to spot trends, reversals, and potential entry points.

What is the Guppy multiple moving average (GMMA)

GMMA is the outcome of Daryl Guppy’s determination to speculate market movements by combining short and long-term trends. While the central idea was to consider both long and short-term trends, it meant tackling too much market noise.

The solution he reached was to use two groups of exponential moving averages (EMAs). The first was the short-term group, which moves faster and represents the activity of speculators and day traders. The second was the long-term group, which is slower to react and reveals the behaviour of long-term investors. The Australian financial columnist decided to use 12 EMAs to look deeper into market sentiment and determine the strength of a trend.

The key difference between the GMMA and any traditional single-line moving average or a multi-MA indicator, such as moving average convergence/divergence (MACD), is its two-layered approach. Instead of just showing you the average price over one period, the GMMA forms two distinct ‘ribbons’ or ‘clusters.’ These compress, diverge, and cross, providing a richer, more nuanced view of the market's health and momentum.

How to calculate the GMMA

The GMMA is easy to calculate – it doesn’t require complex formulas. Instead, traders can just plot 12 different EMAs. These are then interpreted after being segregated into two distinct groups. Here’s a stepwise guide to use GMMA:

Choose your asset and time frame: decide on the chart you'll be using, whether it's a daily, 4-hour, or 1-hour chart. The GMMA works on any time frame.
Calculate the short-term EMA group: this group is composed of six EMAs with the following look-back periods: 3, 5, 8, 10, 12, and 15. Each EMA is a calculation of the average closing price over its respective period, with more weight given to recent prices. These EMAs form the fast ribbon that reflects the actions of short-term traders.
Calculate the long-term EMA group: this group also contains six EMAs. However, these have longer periods: 30, 35, 40, 45, 50, and 60. These EMAs form the ‘slow’ ribbon. Their values are less affected by recent price swings, representing the actions of long-term investors.
Plot the EMAs: plot all 12 of these EMAs on your chart. To make the GMMA visually useful, you must colour each group distinctly. For instance, you could use green for the fast EMAs and red for the slow EMAs.

There’s no single GMMA value. The ‘calculation’ of the GMMA indicators is basically a visual arrangement of the two clusters of EMAs.

The key is determining how the two clusters interact. Whether they are spreading apart, coming together, or crossing over each other. These insights reveal market trends and drive decision-making.

The good news is that you do not have to perform all the calculations and plotting manually. Your broker’s trading platform would provide a ready-to-use GMMA indicator that you can drag and drop on the asset’s price chart.

Setting up the Guppy multiple moving averages

Here's a guide for setting up GMMA on some of the most popular platforms:

Step 1:Open your chart and click on the 'Indicators' button at the top.
Step 2:In the search bar, type 'Moving Average Exponential.'
Step 3:Click on the 'Moving Average Exponential' indicator 12 separate times to add it to your chart.
Step 4: For each of the first six EMAs, open the settings and change the 'Length' to 3, 5, 8, 10, 12, and 15, respectively. Adjust the colour and line thickness to group them visually (e.g., all red).
Step 5:For the remaining six EMAs, set the lengths to 30, 35, 40, 45, 50, and 60. Use a different colour to distinguish this group (e.g., all blue).
Step 6:Save this setup as a template for future use.

MetaTrader 4/5 (MT4/5)

The GMMA is not a built-in indicator on MT4/5, so you will need to add it as a custom indicator.

Step 1:Find and download a GMMA custom indicator file from MQL4.com or MQL5.com, depending on the version you are using.
Step 2:Then, go to 'File' in the top menu and select 'Open Data Folder.'
Step 3:Open the 'MQL5' folder, then the 'Indicators' folder.
Step 4:Copy the GMMA indicator; file you downloaded into this folder.
Step 5:Close the folder and restart your MT4/5 platform. The GMMA should now appear in the 'Navigator' window under the 'Custom Indicators' section.
Step 6:Drag the GMMA indicator onto your chart, and a settings window will appear where you can adjust colours and other parameters. The GMMA should now appear in the 'Navigator' window under the 'Custom Indicators' section.
Step 7:Drag the GMMA indicator onto your chart, and a settings window will appear where you can adjust colours and other parameters.

Note that you can adjust the short and long EMA look-back periods to align with your strategy. The downloaded version comes with the defaults as discussed above.

How to use the GMMA: reading and interpretation

To use the indicator effectively, you need to understand the relationship between the EMA groups. These can help you decide the size, timing, and risk limits for your position.

Determining trend strength

The distance between the two ribbons indicates the strength of a trend. A wide separation is a sign of a strong trend. The wider the gap, the more conviction both short-term traders and long-term investors have in the current direction. Learn more about trend trading strategy.

Identifying trend reversals

A trend reversal is signalled by a crossover of the two groups. A bullish reversal is confirmed when the short-term (red) EMAs cross above the long-term (blue) EMAs, signalling a shift in sentiment. A bearish reversal occurs when the short-term group crosses below the long-term group.

Spotting consolidation

When both the short-term and long-term EMAs are intertwined, close together, or moving sideways, it indicates a lack of a clear trend. This 'tangled' appearance suggests the market is in a state of indecision or consolidation. Beginners, even seasoned traders, consider it best to wait for a clearer indication, such as a breakout.

Visual patterns

Look for compression, or where the ribbons narrow and come closer together, which is a sign of a potential breakout. Divergence, where the ribbons spread apart, signals a strengthening trend. Convergence, where the ribbons move back toward each other, can signal a weakening trend or a potential reversal. It is best that you use high-quality visuals to ensure signals are clearly visible.

Trading strategies with GMMA

The GMMA indicator is used in several trading strategies:

Breakout strategy

You can use a support-resistance indicator (discussed below) for this strategy.

An entry point could be when price breaks above resistance or below support while the short-term GMMA EMAs expand away from the long-term EMAs. When price re-enters the consolidation zone or when the short-term EMAs begin converging, it can be a time to exit.

Pros: captures sharp moves early

Cons: high risk of false breakouts, needs volume confirmation

Trend-following strategy

When the short-term EMAs remain above the long-term EMAs and both groups are sloping upward, it is a signal to open a long position. You can open a short position when the opposite alignment occurs. To exit, consider acting when the EMAs flatten or cross back in the opposite direction.

Pros: simple, effective in strong trends

Cons: may whipsaw in ranging markets and experience late entries in fast-moving markets

Crossover strategy

In a crossover strategy, you can choose to enter a long position when the short-term EMAs cross above the long-term EMAs and begin to expand apart. Notice, the second part here, they must expand apart. Alternatively, you can open a short position when the short-term EMAs cross below the long-term EMAs. Consider choosing to close your position on a reverse crossover or when the EMAs flatten.

Pros: clear rules, easy to automate

Cons: lagging signals, prone to losses in sideways markets

GMMA compression breakout

Compression happens when the 2 groups move very close to each other, almost overlapping, indicating a potential breakout. A compression of both short- and long-term EMAs followed by a rapid expansion is an entry signal, confirming a breakout. An exit can be timed when the EMAs converge again, signalling weakening momentum.

Pros: strong signal for new trends, low-risk entries

Cons: rare setups, requires patience

Combining GMMA and Fibonacci confirmations

Traders often combine indicators to strengthen their trading strategy. Combining GMMA with Fibonacci retracements helps pinpoint entry and exit. Traders chose to open a position when the price retraces to a key Fibonacci level (38.2%, 50%, or 61.8%) and the GMMA short-term EMAs align with the bounce in the direction of the long-term EMAs. They close their position at the next Fibonacci extension level or when an EMA crossover occurs.

Pros: improves entry accuracy, aligns price structure with trend

Cons: retracements may fail in strong momentum and add complexity

Combining GMMA and RSI for signal filtering

Do false signals bother you? This combination may lower them. To enter a long position, wait for the short-term EMA group to cross upward while the RSI is above 50. Enter a short position when the EMAs cross downward while the RSI is below 50. To exit, keep an eye on the RSI to diverge from price action or for the EMAs to flatten.

Pros: reduces false signals, better timing

Cons: may miss opportunities when RSI lags, needs dual confirmation

Like all moving average tools, the GMMA doesn’t predict the future — always confirm signals with volume, price action, or other indicators, and research your trades thoroughly before entering the market. Past performance is not a reliable indicator of future results.

GMMA trading signals

Spotting signals with GMMA requires knowing the meaning of each kind of interaction between the two clusters of EMAs:

Buy signals: a strong buy signal is confirmed when the short-term EMAs cross above the long-term EMAs, and both ribbons are then spread apart and moving upward.
Sell signals: a strong sell signal confirmation is when the short-term EMAs cross below the long-term EMAs, and both ribbons are then spread apart and moving downward.
No signal/sideways markets: when both sets of EMAs are tangled, compressed, and moving horizontally, the markets may be in a consolidation. You can wait for a clear trend before you make a move.

Guppy multiple moving average vs other indicators

GMMA vs EMA

GMMA provides a multi-layered view of short- and long-term trends, while EMA only tracks recent price momentum.

GMMA vs SMA

GMMA reacts quickly to price changes and shows crowd behaviour, while SMA overly smooths trends but often lags.

Feature	GMMA	EMA	SMA
Calculation	Uses 2 groups of EMAs (short- and long-term) to capture trader vs investor behaviour	Single exponential moving average, weighted more on recent prices	Simple average of prices over a set period
Signal clarity	Provides both short-term and long-term trend dynamics in 1 view	Indicates momentum shifts, but only a single timeframe view	Smooths data well but reacts slowly
Trend detection	Highlights strength, maturity, and shifts in trend with multiple layers	Good for fast-moving trend changes	Better for long-term smoothing, weak on early trend signals
Market phases	Effective in identifying consolidation, breakout, and trend continuation	Works well in volatile markets	More suitable for stable, long-term trending markets
Complexity	High	Moderate	Low
Use case	Ideal for traders who want to do an in-depth analysis	Works better for momentum trading and scalping, and crossover strategies	Suits simple confirmation of long-term bias

When to prefer GMMA over other MA tools

Here are a few tips to determine when GMMA would be better than SMA or EMA:

Using GMMA helps analyse both traders and investors together, in 1 chart.
EMA or SMA alone cannot clearly show buildup phases, but GMMA makes them obvious, simplifying breakout identification.
GMMA also works as a tool to filter false trends, as multiple layers reduce noise without over-simplifying data.
When precision matters in timing, GMMA helps balance speed (short-term group) with stability (long-term group).

Advantages and limitations of GMMA

Benefits of using GMMA:

The GMMA indicator provides clarity on when a trend is changing.
It offers a dual-layer insight into both short-term and long-term market sentiment.
The indicator helps identify high-probability pullbacks within an ongoing trend.

Like every technical indicator, GMMA has some limitations. Knowing these limitations can help you step back and confirm your speculation with another indicator.

It is a lagging indicator, being a moving average, that is kind of given.
GMMA may be less effective in markets that are not trending.
Interpreting the GMMA requires some level of prior charting knowledge.

Backtest results and practical examples

In early 2023, bitcoin had been mostly range bound. In October, the GMMA indicator showed the MA lines converging and crossing over. The lines continued to widen till December that year. Bitcoin climbed from around $26,900 in mid-October to more than $42,300 on December 31.

On June 20, 2024, the GBP/USD chart showed a GMMA compression setup. The currency pair moved lower from 1.2700 on that day to 1.2645 on 22 June.

These highlight the GMMA indicator’s strength in identifying breakout potential, which is useful for a trend trading strategy.

Past performance is not a reliable indicator of future results.

Risk management with GMMA

Risk management is crucial when trading with the GMMA indicator. While there are some guidelines, you need to adjust risk parameters to align with your trading goals to develop a suitable risk management strategy.

Stop-loss strategies: stop losses* can prevent loss accumulation if the market moves against your speculation. For a breakout strategy, you can place a stop-loss on the opposite side of the initial compression. For a trend-following strategy, you can place your stop-loss below the long-term EMA group in an uptrend, or above it in a downtrend.

Filtering false signals: to reduce false signals, always use the GMMA in conjunction with other indicators like the Relative Strength Index (RSI) or support and resistance levels. A buy signal on the GMMA is more reliable if the RSI is not overbought.

Position sizing: too much risk exposure is not a recommended trading practice. You can adjust the position size based on the trend's strength. In a wide-ranging, strong trend, you might be more confident in a larger position size, while in a weaker, converging trend, it would be prudent to use a smaller size.

Open a demo trading account to sharpen your trading and risk management strategy to confidently enter live markets.

*Standard stop-losses are not guaranteed. Guaranteed stop-losses incur a fee when activated.