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Guest FloridaTrader
Posted

The Moving Average Technical Indicator shows the mean instrument price value for a certain period of time. When one calculates the moving average, one averages out the instrument price for this time period. As the price changes, its moving average either increases, or decreases.

 

There are four different types of moving averages: Simple (also referred to as Arithmetic), Exponential, Smoothed and Linear Weighted. Moving averages may be calculated for any sequential data set, including opening and closing prices, highest and lowest prices, trading volume or any other indicators. It is often the case when double moving averages are used.

 

The only thing where moving averages of different types diverge considerably from each other, is when weight coefficients, which are assigned to the latest data, are different. In case we are talking of simple moving average, all prices of the time period in question, are equal in value. Exponential and Linear Weighted Moving Averages attach more value to the latest prices.

 

If someone makes a posting regarding moving averages, ask them which of the four moving averages they are referring to and what are the periods (properties) and shift if needed.

 

I hope this helps.

Posted

@floridatrader has given you the conceptual background.

 

Now what period to use, it all depends on your risk apetite and your investment/trading philosophy.

 

They say, above 200 day, (be simple or Exponential, these two are widely used) Market is into Bull phase and reverse for bear market. But Singnal is too late and suitable for Investors

 

If you are swing traders, you can twist around 18, 21, 35 or lower time frame to check out the swing up and down.

 

One can also enter the trade when there is cross over of faster moving average closes above (from below) over slower moving average, and reverse for sell.

 

 

Hope, above helps you.

Regards

  • 3 months later...
Posted

the main difference between the kinds of MA is the reactivity to changes on quotations...

 

plot the 3 main kinds of MA on a same chart and you will see that they do not react to markt changes at the same way.

  • 2 weeks later...
  • 1 month later...

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