MA Deltas

When is the price going to change? A really good way to see when a price has decided to go in another direction is when two Moving Averages cross. A very popular set of Moving Averages is the 5 Period / 12 Period. When grouped together this becomes a powerful signal for the Forex trader. It is so popular it has been given a special name "The Creek". In the below chart you can see the Creek is the combination of the RED and GREEN lines.    The GREEN line represents the 5 Period MA and the RED line represents the 12 Period MA.   We know from our Moving Average dicussion that the GREEN line should change direction faster than the RED line and thus hug the price candles closer.

At Point #1 you can see the GREEN line move above the RED line and the price went up.  At #2 the GREEN line moved below the RED line and the price went down.   At #4 the 5 MA (GREEN line) moved above the 12 MA (RED line) and the price really went up.

In this chart the important points are when the 5 and 12 MA Cross.    Sometimes there wasn't much of a cross, such as at #4, but as they spread apart the price really moved up.   This difference between the 5 MA and the 12 MA is called the width of the Creek or the MA DELTA.   The MA DELTA allows us to measure the strength of the move.   The wider they move apart from each other the stronger the price movement.

We watch for the inital cross and then wait until the two Moving Averages spead apart, have sufficent DELTA, before taking it as a true signal.  On a previous page we talked about "The River"  it is exactly the same concept but uses the 50 MA and the 100 MA.

Some traders don't want to use 5/12 but might want to use 7/15 or 4/22 to give a better signal based upon the Pair prices.  Our MA DELTA Report allows you to use any two MA's and will send you a signal when the price crosses.



Previous Topic : Breakouts             Next Topic : One Two Three