EP-MA Diff is an indicator based on moving averages, and is therefore a trend indicator. Its main virtue is to help us detect shopping moments with highly visual patterns.
It consists of several lines, some of which form pairs, filling in the area they form in different colors depending on the situation:
1.- Quick Averages: (pairs 1-2 and 1-3) They are sensitive to movements in the very short term. 1-3 is orange, 1-2 green.
2.- Slow averages (pairs 1-5 and 5-6). They reflect longer-term changes, especially line 5-6 (purple). Line 1-5 is painted blue.
3.- Main Average. It is the average line 1-4.
4.- 0 line
How is it interpreted?
When the average 1-5 is below its partner (the average 5-6) we are in a bearish situation. If it is above, in a growth situation.
We can also consider the position of the 5-6 average with respect to line 0. Values above will be bullish, values below zero, bearish.
Regarding the fast averages, they give us the best entry signals when they form the "submarine" pattern, which is colored yellow. In a lateral or bullish situation, the appearance of a "submarine" will give us the possibility of buying.
During a bearish situation, another pattern will appear, which we have called "harlequin". This pattern appears as a bag, which contains an underwater pattern, but we see that more colors are also drawn underneath. The average 1-5 shown below bounces back, initiating growth. The two fast averages and the main average are also growing.
In a fall, we will wait for the formation of the second or third harlequin pattern, or preferably we will wait for a harlequin pattern to be formed in a higher position than the previous one, as appears in the following image, in which can be appreciated a divergence from the price, which has made a lower minimum. Another good entrance will be the one that forms on a double floor: the underwater pattern appears
We have commented that in a very bullish trend, most of the "submarine" patterns could be a successful purchase that will allow us to join the trend. The following graphic serves as an example: