Moving Average
Liens connexes:
Acceleration / Deceleration Oscillator | Moving Average |
MA - Moving Average
Shows the average instrument price value for a certain period of time.There are several types of MA:
- Simple Moving Average (SMA)
- Exponential Moving Average (EMA)
- Smoothed Moving Average (SMMA)
- Linear Weighted Moving Average (LWMA)
While calculating moving average such parameters as closing and opening prices, price maximum and minimum, trade volume and sometimes other indicators' data are used as well as the moving average of moving averages themselves.
Selling and buying signals appear when prices cross the indicator lines and proceed up or downwards. This trading system that is based on the moving average, is not designed to provide entrance into the market right in its lowest point, and its exit right on the top. Instead it allows to act according to the trend.
Moving averages may be also used with other indicators.
Calculation:
Simple Moving Average (SMA)
Simple, in other words, arithmetical moving average is calculated by summing up the prices of instrument closure over a certain number of single periods (for instance, 12 hours). This value is then divided by the number of such periods.SMA = SUM (CLOSE (i), N) / N
Where:
SUM - sum;
CLOSE (i) - current period closing price;
N - number of periods in calculation.
Exponential Moving Average (EMA)
Exponentially smoothed moving average is calculated by adding the moving average of a certain share of the current closing price to the previous value. With exponentially smoothed moving averages, the latest prices are of more value. P-percent exponential moving average will look like:EMA = (CLOSE (i) * P) + (EMA (i - 1) * (100 - P))
Where:
CLOSE (i) - current period closing price;
EMA (i - 1) - preceding period moving average value;
P - percentage of using the price value.
Smoothed Moving Average (SMMA)
The first value of this smoothed moving average is calculated as the simple moving average (SMA):(SMA).
SUM1 = SUM (CLOSE (i), N)
SMMA1 = SUM1 / N
The second and succeeding moving averages are calculated according to this formula:
SMMA (i) = (SUM1 - SMMA (i - 1) + CLOSE (i)) / N
Where:
SUM - sum;
SUM1 - total sum of closing prices for N periods, calculated from the previous bar;
SMMA (i - 1) - smoothed moving average of the previous bar;
SMMA (i) - smoothed moving average of the previous bar (excluding the first one);
CLOSE (i) - current closing price;
N - smoothing period.
Linear Weighted Moving Average (LWMA)
In the case of weighted moving average, the recent data is of more value than more early data. Weighted moving average is calculated by multiplying each of the closing prices within the considered series, by a certain weight coefficient.LWMA = SUM (CLOSE (i) * i, N) / SUM (i, N)
Where:
SUM - sum;
CLOSE(i) - current closing price;
SUM (i, N) - total sum of weight coefficients;
N - smoothing period.
Similar information about indicators you can find in information system of trade platform MetaTrader 4 (Help-> Help Topics [F1] -> Ananlitics -> Technical Indicators).
