Simple Moving Average
The Simple Moving Average issimply an average of values over a specified period of time. A Moving Averageis most often used to average values for a smoother representation of theunderlying price or indicator. A simple moving average is formed by computingthe average price of a instrument over a specified number of periods Its theaverage stock price over a period of time. Keep in mind that equal weighting isgiven to each periods price.
It makes easier to spot trends,especially helpful in volatile markets. It smoothes a data series and make iteasier to spot trends, something that is especially helpful in volatilemarkets. They also form the building blocks for many other technical indicatorsand overlays. Because moving averages are lagging indicators, they fit in thecategory of trend following indicators. When prices are trending, movingaverages work well. when prices are not trending, moving averages can givemisleading signals
No comments:
Post a Comment