Distance From moving average

The Distance From moving average indicator measures the numerical spread between the current price and a selected moving average to identify trend deviations and mean reversion opportunities.

Usage

The Usage section describes how the script can be used. Traders can use this tool to visualize how far price has extended away from its average value, which often serves as a proxy for overbought or oversold conditions in a trending market.

• Trend Confirmation: When the indicator is above the zero line, the price is trading above the moving average, confirming a bullish trend. When below, it confirms a bearish trend.
• Mean Reversion: Large spikes or dips in the distance value can signal that price is overextended and may soon return to the moving average (the mean).
• Crossings: The indicator crossing the zero line corresponds exactly with the price crossing the moving average on the price chart.

Details

The script calculates the distance by subtracting the selected moving average value from the current closing price (close - ma). The output is displayed as a histogram or line oscillating around a zero level. The indicator supports four specific calculation methods:

• Simple Moving Average (SMA): The arithmetic mean of price over a specific period.
• Exponential Moving Average (EMA): Gives more weight to recent prices to reduce lag.
• Weighted Moving Average (WMA): Assigns linear weighting to emphasize recent data.
• Hull Moving Average (HMA): Designed to reduce lag while maintaining smoothness.

Settings

• Moving Type: Selects the mathematical model for the moving average (SMA, EMA, WMA, or HMA).
• MA: Sets the lookback period (length) used to calculate the moving average.

FAQ

How do I interpret the zero line in this indicator? The zero line represents the value of the moving average itself. When the indicator is at zero, the price is touching the moving average. Positive values indicate price is above the average, while negative values indicate price is below it.

Can I use this for alert notifications? Yes, the script includes built-in alert conditions that trigger when the price crosses over or under the selected moving average.

How do I get access to the Distance From moving average indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.