This website or its third-party tools use cookies which are necessary to its functioning and required to improve your experience. By clicking the consent button, you agree to allow the site to use, collect and/or store cookies.
Please click the consent button to view this website.
I accept
Deny cookies Go Back
  • Price Action Trading Course
  • Trading Setups
  • Topics ↓
    • Price Action Trading
    • Day Trading
    • Trader Development
    • Site Map
  • TSR Trading Guides
  • Resources
    • Udemy Trading Course
    • Trading Books
    • Trading Indicators
    • Forex Tester 4
    • NinjaTrader & Kinetick
  • Member Login

Trading Setups Review

Trading Strategies, Guides, and Articles for Active Technical Traders

You are here: Home / Trading Articles / Demystifying the Displaced Moving Average

Demystifying the Displaced Moving Average

By Galen Woods in Trading Articles on December 23, 2013

If you shift the regular moving average on your chart to the right or left, you get a displaced moving average. Many trading strategies use displaced moving averages as an improvement over regular moving averages.

However, what is the value of displacing the moving average right or left?

Is it an improvement over the normal moving average?

Let’s find out.

Displacing Moving Average to the Right

Comparing the Regular Moving Average with the Displaced Moving Average

Displaced Moving Average versus Regular Moving Average
In this example, we placed a 6-period simple moving average (orange) on the daily chart of Southwest Airlines. Then, we added a 6-period simple moving average displaced by 4 periods to the right (blue). (We adapted these settings from the DMA channel trading strategy.)

To highlight price crossovers, we displayed prices with a line chart instead of the usual candlestick charts.

From this chart, it is clear that price always crosses the regular moving average before crossing the displaced moving average.

The effects of using a displaced moving average are:

  • Less crossover signals
  • More reliable signals, filtering out small trends
  • More lag in signals

Sounds like the differences between a fast moving average (shorter period setting) and a slow moving average (longer period setting).

So is the displaced moving average just a slower moving average?

Comparing the Displaced Moving Average with a Slower Moving Average

Displaced Moving Average Versus Slow Moving Average
To check if a displaced moving average is merely a slower moving average, we doubled the period setting of the regular moving average to 12.

Our key observations:

  • 12-period moving average tracks the displaced moving average very well during trends.
  • The displaced moving average lags more at turning points.

Effects of Displacing Moving Average to the Right

Summing up what we observed, a displaced moving average is effectively a slower moving average with increased lag at turning points.

We cannot reproduce a displaced moving average simply by adjusting the period of a simple moving average. However, the displaced moving average is not a mystical forecasting tool simply because we displaced it to the right, into the future.

I do not use moving averages displaced to the right. It requires two inputs (look-back period and displacement period) and complicates an originally simple trading indicator. And the valued added is limited. It is just yet another flavor of moving average, which could work if you learn to use it.

If you want to use displaced moving averages in your trading, you can take a look at DMA channel and Bill William’s Alligator system.

Displacing Moving Average to the Left

Displacing a moving average to the left removes the value of the moving average for real-time analysis.

Cycle Analysis

However, shifting the moving average to the left by half of its look-back period actually centers the moving average and is useful for cycle analysis.

A centered moving average seeks to remove trend from price to find market cycles.

Displaced Keltner Channel Example

Cycle Analysis with Displaced Moving Average
This example uses a centered Keltner Channel for cycle analysis.

This Keltner Channel consists of a 41-period moving average of the typical price (H+L+C/3), and two channel lines (2 x average true range away from the moving average). We then displace the channel 20 periods to the left to center it.

The centered channel highlights cycle lows and highs. By measuring the cycle period, we can project the possible timing of the next cycle low (or high). In this chart of the S&P ETF, the projected timing of the next cycle low was spot on.

To learn more about cycle analysis using centered moving averages, you can refer to:

  • J.M. Hurst’s The Profit Magic of Stock Transaction Timing
  • Christopher Grafton’s Mastering Hurst Cycle Analysis: A modern treatment of Hurst’s original system of financial market analysis
  • Detrended Price Oscillator
  • Lars von Thienen’s Decoding The Hidden Market Rhythm – Part 1: Dynamic Cycles: A Dynamic Approach To Identify And Trade Cycles That Influence Financial Markets (WhenToTrade) (Volume 1)

Conclusion: Displaced Moving Averages

Displacing moving averages in different directions has distinct implications. Displacing the moving average to the right introduces more lag, and displacing it to the left aids in cycle analysis.

Although the basis of a displaced moving average is a simple trading indicator, it is important to understand the implications of shifting moving averages before we use them in our trading strategies.

Read more about Keltner Channel, Moving Average, Trading Indicators

Serious Traders Only!

Day Trading With Price Action – A complete course that teaches you the art of price action trading.

Perfectly structured with step-by-step guides to help you understand the principles of price action analysis.

Click here for the course syllabus

More From Trading Setups Review

The Power Of Multiple Trading Signals In Confluence Zones

Best Day Trading Forums

9/30 Trading Setup

Trading Course Banner

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *


Search Trading Setups Review

Get a Free Course Chapter from Galen Woods' Day Trading With Price Action Course [PDF]

Plus, our latest trading guides and tips in right your inbox.

Recommended For You

10 Chart Patterns For Price Action Trading

A Beginner’s Guide to Day Trading Futures Using Price Action

Top 10 Day Trading Books

6 Timeless Trading Ideas from Legendary Traders

Impulse System Long Signal on KSS Weekly

Day Trading Forex With Ichimoku Kinko Hyo

3 Powerful Tips to Improve Your Trading, Backed by Science

Trading Course Banner

Trading Setups Review

  • About Us
  • Contact Us
  • Advertise With Us
  • Privacy Policy
  • Affiliate Disclaimer
  • Full Risk Disclosure

Learn More

  • Day Trading With Price Action Course
  • TSR Trading Guides
  • Trading Setups
  • Trading Articles
  • Trading Books
  • Site Map

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.


The website contents are only for educational purposes. All trades are random examples selected to present the trading setups and are not real trades. All trademarks belong to their respective owners. We are not registered with any regulating body that allows us to give financial and investment advice.


Trading Setups Review © 2012–2021