Moving Averages
Moving averages are one of the most popular and easy to use tools available to the technical analyst. They smooth a data series and make it easier to spot trends.
A moving average is simply the average of a series of numbers over a period of time which is constantly updated by dropping the oldest value and then adding the newest value and recalculating the average.
Moving average is an indicator that shows the average value of a security's price over a period of time.
By creating an average of prices, that "moves" with the addition of new data, the price action on the security being analyzed is "smoothed". In other words, by calculating the average value of a underlying security or indicator, day to day fluctuations are reduced in importance and what remains is a stronger indication of the trend of prices over the period being analyzed.
The term "Moving" refers to the method of calculation which takes the average value over a fixed period of time and adds the latest period data to the calculation of the average while dropping the first period of the calculation so that the average continues to be calculated by the same number of periods but moves with each new period of data that occurs.
Apart from the two most popular types of moving averages, the Simple Moving Average (SMA) and the Exponential Moving Average (EMA) there are the triangular, variable, and weighted.
(To be continued...)
If you have a question please post them here!
Moving averages are one of the most popular and easy to use tools available to the technical analyst. They smooth a data series and make it easier to spot trends.
A moving average is simply the average of a series of numbers over a period of time which is constantly updated by dropping the oldest value and then adding the newest value and recalculating the average.
Moving average is an indicator that shows the average value of a security's price over a period of time.
By creating an average of prices, that "moves" with the addition of new data, the price action on the security being analyzed is "smoothed". In other words, by calculating the average value of a underlying security or indicator, day to day fluctuations are reduced in importance and what remains is a stronger indication of the trend of prices over the period being analyzed.
The term "Moving" refers to the method of calculation which takes the average value over a fixed period of time and adds the latest period data to the calculation of the average while dropping the first period of the calculation so that the average continues to be calculated by the same number of periods but moves with each new period of data that occurs.
Apart from the two most popular types of moving averages, the Simple Moving Average (SMA) and the Exponential Moving Average (EMA) there are the triangular, variable, and weighted.
(To be continued...)
If you have a question please post them here!
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