# Catching Market Reversals in Python.

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

10 min readFeb 18, 2022

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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 arraydef adder(Data, times):        for i in range(1, times + 1):            new_col = np.zeros((len(Data), 1), dtype = float)…`

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