# Catching Market Reversals in Python.

## How to Create a Simple Contrarian Trading Strategy in Python.

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Combining indicators is the first key to finding good strategies. In this article an indicator based on moving averages will be combined with the well-known Relative Strength Index to find interesting trading signals.

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# The Moving Average Distance Index

This is a plain simple indicator where we analyze the distance of the market’s price relative to its moving average. Here are the steps to do so:

**Calculate a 20-period moving average on the market’s price.****Subtract each closing price from the 20-period moving average.****Calculate a 60-period standard deviation of the result from step 2.****Calculate a 60-period moving average of the result from step 2.****Calculate the bounds using the Bollinger Band’s intuition.**

The above chart shows hourly values on the USDCAD with the Moving Average Distance Index — MADI in the second panel, we have chosen a 20-lookback period of the moving average with a 60-period volatility bands and a 3 standard-deviation factor.

**# The function to add a number of columns inside an array**

def adder(Data, times):

for i in range(1, times + 1):

new_col = np.zeros((len(Data), 1), dtype = float)…