What is the GMMA Indicator and How to Trend Trade with It?

What Is the Guppy Multiple Moving Average (GMMA)?

The Guppy Multiple Moving Average (GMMA) is a trend-following indicator created by Australian trader Daryl Guppy.

Unlike a single moving average (SMA), which only smooths out price data over one time period, the GMMA combines two sets of exponential moving averages (EMAs).

• One group tracks short-term price action (representing traders)

• The other group follows long-term trends (representing investors)

When you plot these two groups on a chart, they form a “moving average ribbon” that visually shows how the market is behaving.

• If the short-term EMAs are above and pulling away from the long-term EMAs, it suggests traders are driving a strong uptrend.

• If they cross below or start to compress, it can signal weakness or the start of a downtrend.

In simple terms, the GMMA gives you a clearer picture of market sentiment by showing how short-term traders and long-term investors interact.

How to Calculate the GMMA

The Guppy Multiple Moving Average (GMMA) is built using exponential moving averages (EMAs).

Instead of just one or two EMAs, it combines two groups of six EMAs to represent short-term traders and long-term investors.

A. The EMA Formula

The basic formula for an EMA is:

Where:

• Close = the current closing price

• EMA₍previous₎ = the EMA value from the prior period

• Multiplier = 2/(N+1), where N is the number of periods

B. The GMMA Groups

• Short-term EMAs (traders): 3, 5, 8, 10, 12, 15 periods

• Long-term EMAs (investors): 30, 35, 40, 45, 50, 60 periods

C. Putting It Together

• Calculate each EMA separately for its chosen period using the formula above.

• Plot the six short-term EMAs and six long-term EMAs on the price chart.

• Together, they form the GMMA “ribbon.”

D. In Practice

Most trading platforms calculate and display the GMMA automatically, you just select the GMMA indicator or manually add the two EMA groups.

So while it’s helpful to know the math, you don’t need to calculate each line by hand.

What Are the Components of a GMMA?

The Guppy Multiple Moving Average (GMMA) is made up of two distinct groups of exponential moving averages (EMAs). Each group represents a different type of market participant: short-term traders and long-term investors.

Together, they form a moving average “ribbon” that reflects how these groups interact in the market.

Short-Term Group (Traders)

• Periods: 3, 5, 8, 10, 12, and 15 EMAs

• Purpose: These lines react quickly to price changes, capturing short-term sentiment and momentum.

• Interpretation: When these EMAs spread out and move strongly in one direction, it often signals that active traders are driving a trend. When they compress, it may suggest hesitation or a possible reversal.

Long-Term Group (Investors)

• Periods: 30, 35, 40, 45, 50, and 60 EMAs

• Purpose: These lines move more slowly, reflecting the outlook of longer-term investors.

• Interpretation: A steady upward slope in this group points to strong underlying support, while a flattening or downward slope indicates weakening trend confidence.

The Relationship Between the Groups

The gap (or spread) between the short-term and long-term groups is one of the most important features of the GMMA.

A wide gap shows strong agreement between traders and investors, confirming a solid trend.

Moreover, a narrowing or crossing gap can warn of trend weakness, consolidation, or an upcoming breakout.

In short, the GMMA’s components work like a conversation between traders and investors.

The short-term group tells you what’s happening right now, while the long-term group shows the bigger picture. And, the space between them reveals how aligned (or not) the two perspectives are.

How to Trade a Trend Using the GMMA

Trading with the Guppy Multiple Moving Average (GMMA) is all about reading the relationship between the short-term and long-term groups of EMAs.

How to Set Up the Guppy Multiple Moving Average

Setting up the GMMA is straightforward, but it helps to know the default settings:

1. Add the short-term EMAs (3, 5, 8, 10, 12, and 15 periods).

2. Add the long-term EMAs (30, 35, 40, 45, 50, and 60 periods).

3. Use color coding: Many traders use one color family (like green or blue) for the short-term group and another (like red or orange) for the long-term group. This makes it easier to see compression, divergence, and crossovers.

4. Choose your timeframe: The GMMA can be applied on daily, hourly, or even shorter charts. Swing traders often prefer daily charts, while intraday traders may use 15-minute or 1-hour setups.

Most charting platforms have built-in GMMA templates, or you can create it manually by adding the EMAs one by one.

How to Use the Guppy Multiple Moving Average

Once your GMMA is on the chart, here’s how to put it into action:

1. Identify the trend: Are the short-term EMAs above or below the long-term EMAs? Is the gap wide or narrow?

2. Spot trend strength: A wide, consistent separation between the two groups shows a strong trend. If the groups are tangled, it usually means a sideways or choppy market.

3. Watch for compression: When the short-term group squeezes back toward the long-term group, it often signals indecision or a coming breakout.

4. Confirm with price action: GMMA works best when combined with chart patterns, support/resistance, or technical indicators like RSI or ADX.

Think of GMMA as a trend filter. It helps you decide whether to trade with the trend, avoid a range, or prepare for a breakout.

How Do You Interpret Trends with the GMMA?

Reading the GMMA is like reading two conversations happening at once:

• Bullish trend: Short-term EMAs are stacked above the long-term EMAs, both sloping upward, with clear separation.

• Bearish trend: Short-term EMAs are stacked below the long-term EMAs, sloping downward, with widening gaps.

• Sideways market: Short- and long-term groups overlap, flatten, or stay tightly compressed, often a signal to wait.

• Trend reversal: Compression followed by a crossover often hints at a shift in sentiment, either from bullish to bearish or vice versa.

In short, wide separation = confidence, while compression = uncertainty. Watching how the two groups interact helps you spot when traders and investors are aligned, or at odds.

Trading Strategies Using the Guppy Multiple Moving Average (GMMA)

The Guppy Multiple Moving Average (GMMA) is most useful when applied as part of a structured trading strategy.

Below are some of the most common GMMA-based strategies.

Crossover Strategy

The crossover strategy is the simplest way to apply the GMMA.

In this method, traders look for the short-term group of EMAs to cross above the long-term group as a buy signal, or below it as a sell signal.

When both groups not only cross but also begin to fan out, it indicates that momentum is building and the trend is gaining strength.

While effective in trending markets, crossovers often generate false signals in sideways conditions, which makes confirmation with other tools important.

Trend Continuation (Pullback) Strategy

A second approach is the trend continuation strategy, which focuses on trading pullbacks within an existing trend.

Instead of jumping in at the first crossover, traders wait for price to retrace into the long-term EMAs.

If the short-term group then turns back in the direction of the main trend, it suggests that the market remains strong. This approach helps reduce premature entries and provides more reliable signals.

Breakout Strategy

The breakout strategy makes use of GMMA compression. When both the short- and long-term groups narrow and bunch together, the market is usually in a consolidation phase.

A sharp expansion afterward, where the ribbons begin to spread apart again, can mark the start of a breakout.

Traders often pair this setup with volume indicators or chart patterns to confirm the move and avoid false breakouts.

Multi-Timeframe Strategy

Another useful method is the multi-timeframe strategy, which involves analyzing GMMA signals on more than one chart.

For example, a trader might use the daily GMMA to confirm the overall market trend and then look for entry opportunities on shorter timeframes, such as the one-hour or fifteen-minute chart.

This alignment across timeframes helps ensure trades are placed in the direction of the broader trend, improving accuracy and reducing risk.

GMMA with Other Indicators

Finally, the GMMA often works best when combined with other indicators.

Since it is inherently a lagging tool, pairing it with momentum oscillators like RSI indicator or Stochastic can prevent entering trades in overbought or oversold conditions.

The ADX indicator is also a popular companion, as it can confirm whether the market is trending strongly enough to justify using the GMMA.

Additional confirmation from MACD or price action patterns can further improve reliability.

Advantages and Limitations of the GMMA

Like any technical indicator, the Guppy Multiple Moving Average (GMMA) has its strengths and weaknesses.

Understanding both sides can help traders decide when to rely on it and when to be cautious.

Conclusion

The Guppy Multiple Moving Average (GMMA) is a practical way to visualize how short-term traders and long-term investors interact in the market.

By combining two groups of EMAs, it highlights trend strength, potential reversals, and breakout opportunities in a way that a single moving average cannot. While it does have limitations, the GMMA is still a valuable addition to your trading strategies.