Measuring Moving Average Fan Alignment with Three Normalized Scores
Summary
The indicator converts a fan of moving averages into three bounded readings: price versus the fan, the fan’s ordering around a reference average, and the fan’s position relative to its slowest active average. Each score divides signed differences by their absolute differences, producing a scale from -100 to +100. The normalization measures directional agreement rather than the size of gaps, so similarly ordered fans can score alike even when their spreads differ.
The document explains how the readings can identify aligned trends, tangled ranges, and early divergence when price moves before the averages. It also describes signal dots based on the relative scores, suggesting a mean-reversion interpretation for the Open condition, and proposes using the ordering score as a regime filter or screener. These are indicator interpretations and example rules, not tested performance evidence. Scores can saturate at the bounds, require sufficient history for the longest average, and depend on the chosen periods and anchor; changing list order affects the structural score. The source also notes that results are not a measure of momentum or fan distance.
Key ideas
- The three scores compare price and moving averages from different reference points using the same signed-to-absolute difference ratio.
- The normalized scale measures agreement in direction rather than the distance between averages.
- A high absolute ordering score indicates a consistently stacked fan, while readings near zero indicate interleaving.
- The price score may turn before the average-ordering score, creating a divergence that can signal a changing regime.
- The structural score depends on the last active average, so changing the list or anchor changes its interpretation.
- Bounded scores can saturate and the longest configured average requires substantial chart history.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.