Pathshala: Moving Averages

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<h1 style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Moving Averages</span></h1>
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJ3XCtcG7tLgkcPIsG8cWxiAz86OdY23EwPox598JR1IiVMBXdeAtN7cb6bgWCxs2Jqb5gWZhvQigN_U-LIi47nqvAvBz-ZAMkF6Y7cc1iYq1xDRBgQekH6edi3shhihC6tT1GzeclvpE/s1600/grade4-moving-average-10.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="298" data-original-width="525" height="112" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJ3XCtcG7tLgkcPIsG8cWxiAz86OdY23EwPox598JR1IiVMBXdeAtN7cb6bgWCxs2Jqb5gWZhvQigN_U-LIi47nqvAvBz-ZAMkF6Y7cc1iYq1xDRBgQekH6edi3shhihC6tT1GzeclvpE/s200/grade4-moving-average-10.png" width="200" /></a><span style="font-family: "arial" , "helvetica" , sans-serif;">A <b>moving average</b> is simply a way to smooth out price action over time.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
</span><span style="font-family: "arial" , "helvetica" , sans-serif;">By “moving average”, we mean that you are taking the average closing 
price of asecurity  for the last ‘X’ number of periods.</span><br />
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On a chart, it would look like this:</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Like every indicator, a moving average indicator is used to help us forecast future prices.</span><span style="font-family: "arial" , "helvetica" , sans-serif;"> By looking at the slope of the moving average, you can better determine the potential direction of market prices.
</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">As we said, moving averages smooth out price action.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">There are different types of moving averages and each of them has their own level of “smoothness”.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Generally, the smoother the moving average, the slower it is to react to the price movement.</span></div>
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The choppier the moving average, the quicker it is to react to the price movement.
</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">To make a moving average smoother, you should get the average closing prices over a longer time period.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Now, you’re probably thinking, “C’mon, let’s get to the good stuff. How can I use this to trade?”</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">In this section, we first need to explain to you the two major types of moving averages:</span></div>
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<li><span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Simple</b></span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Exponential</b></span></li>
</ol>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgju9RMTSVYUirR-YBDsEK6fwZhrySwovW13B1lGLHbAS39NIB-YItqzim4j5eAxiYtG6fxOeB7NDxv5iRkvXOkFNhq9xPpgi0jcKuWhzaJ6VRPtl-8Xbi04KOtHDhZ-wujYxggouyGl9M/s1600/messi.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="428" data-original-width="600" height="142" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgju9RMTSVYUirR-YBDsEK6fwZhrySwovW13B1lGLHbAS39NIB-YItqzim4j5eAxiYtG6fxOeB7NDxv5iRkvXOkFNhq9xPpgi0jcKuWhzaJ6VRPtl-8Xbi04KOtHDhZ-wujYxggouyGl9M/s200/messi.jpg" width="200" /></a><span style="font-family: "arial" , "helvetica" , sans-serif;">We’ll also teach you how to calculate them and give the pros and cons
 of each. Just like in every other lesson in the BabyPips.com School of 
Pipsology, you need to know the basics first!</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">After you’ve got that on lockdown like Argentinian soccer player Lionel Messi’s ball-handling
 skills, we’ll teach you the different ways to use moving averages and 
how to incorporate them into your trading strategy.</span></div>
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<h1 style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif; font-size: large;">1. Simple Moving Average</span></h1>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The Simple Moving Average is arguably the most popular technical analysis 
tool used by traders. The Simple Moving Average (SMA) is used mainly to <b>identify 
trend direction</b>, but is commonly used to <b>generate buy and sell signals</b>. The SMA 
is an average, or in statistical speak - the mean. An example of a Simple Moving 
Average is presented below:</span></div>
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</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The prices for the last 5 days were 25, 28, 26, 24, 25. The average would be 
        (25+28+26+26+27)/5 = 26.4. Therefore, the SMA line below the last days price of 
        27 would be 26.4. In this case, since prices are generally moving higher, the 
        SMA line of 26.4 would be <b>acting as support</b> (see: Support & Resistance). </span><br />
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</ul>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The chart below shows a 20-day Simple Moving Average acting as support for prices.</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYm4tfJdg1QjE9weO7rwR5Xec9xLZPAn6HHiGlgXrmvK0mpdBkfNZiJMDZxy67tA-NWrwbvHeVyi8b6-SI1eWfWTm2zBuf9YwpDTnN_h5ARXXI4hEOBx08oojMb9y6r7Sio_7PCBHkN1U/s1600/unnamed.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="350" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYm4tfJdg1QjE9weO7rwR5Xec9xLZPAn6HHiGlgXrmvK0mpdBkfNZiJMDZxy67tA-NWrwbvHeVyi8b6-SI1eWfWTm2zBuf9YwpDTnN_h5ARXXI4hEOBx08oojMb9y6r7Sio_7PCBHkN1U/s1600/unnamed.png" />\</a></div>
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<h2 class="buy" style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Moving Average Acting as Support - Buy Signal</span></h2>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">When price is in an uptrend and subsequently, the moving average is in an 
      uptrend, and the moving average has been tested by price and price has bounced 
      off the moving average a few times (i.e. <b>the moving average is serving as a 
      support line</b>), then buy on the next pullbacks back to the Simple Moving 
      Average.</span></div>
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    </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">A Simple Moving Average can serve as a line of resistance as the chart shows:</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRsjfaaO8wkGrfDnzaCMYt4E8ooMy3at-aTZJ18WZ94sMZGRF92FRcYGF3u1fwfgMa85wYR414780qCMJnQ6p6yIvIPQr-71y64tz17pmPjVhURF2ECtDgt5DONZBuoXcN59ixu0Ep-6w/s1600/unnamed2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="350" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRsjfaaO8wkGrfDnzaCMYt4E8ooMy3at-aTZJ18WZ94sMZGRF92FRcYGF3u1fwfgMa85wYR414780qCMJnQ6p6yIvIPQr-71y64tz17pmPjVhURF2ECtDgt5DONZBuoXcN59ixu0Ep-6w/s1600/unnamed2.png" /></a></div>
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<h2 class="sell" style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Moving Average Acting as Resistance Sell Signal</span></h2>
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      </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">At times when price is in a downtrend and the moving average is in a 
        downtrend as well, and price tests the SMA above and is rejected a few 
        consecutive times (i.e. the <b>moving average is serving as a resistance line</b>), 
        then buy on the next rally up to the Simple Moving Average.</span></div>
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      </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The examples above have been only using one Simple Moving Average; however, 
        traders often use two or even three Simple Moving Averages. The advantages to 
        using more than one Simple Moving Average is discussed on the next page.</span></div>
<h1>
<span style="font-family: "arial" , "helvetica" , sans-serif;">2. Moving Average Crossovers</span></h1>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Moving average crossovers are a common way traders use Moving Averages. A 
crossover occurs when a faster Moving Average (i.e. a shorter period Moving 
Average) crosses either above a slower Moving Average (i.e. a longer period 
Moving Average) which is considered a<span style="color: lime;"> <b>bullish crossover</b></span> or below which 
is considered a <span style="color: red;"><b>bearish crossover</b></span>.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The chart below
      shows the 50-day Simple Moving Average and the 200-day Simple Moving Average; 
      this Moving Average pair is often looked at by big financial institutions as a 
      long range indicator of market direction:</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjopcFvIJ0j7Efj5eTiTxnqy-dNrtBktTwo_KdEg1bVAlPPlY1yGV1cJTXcKaW8zlaObNvnNwYck0cq9qwCyrj8iDSV_vQTVUNRupFFGTNVPI2RihEFdggcVpWDVDRrPDG_h1DRBIMryPM/s1600/unnamed3.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="350" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjopcFvIJ0j7Efj5eTiTxnqy-dNrtBktTwo_KdEg1bVAlPPlY1yGV1cJTXcKaW8zlaObNvnNwYck0cq9qwCyrj8iDSV_vQTVUNRupFFGTNVPI2RihEFdggcVpWDVDRrPDG_h1DRBIMryPM/s1600/unnamed3.png" /></a></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Note how the long-term 200-day Simple Moving Average is in an uptrend; this is a 
      signal that the market is quite strong. Generally, a buy signal is established 
      when the shorter-term 50-day SMA crosses above the 200-day SMA and contrastly, a 
      sell signal is indicated when the 50-day SMA crosses below the 200-day SMA. </span></div>
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    </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">In the chart above of the S&P 500, both buy signals would have been 
      extremely profitable, but the one sell signal would have caused a small loss. 
      Keep in mind, that the 50-day, 200-day Simple Moving Average crossover is a very 
      long-term strategy.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">
    For those traders that want more confirmation when they use Moving Average 
      crossovers, the 3 Simple Moving Average crossover technique could be used. An 
      example of this is shown in the chart below.</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWu3212U-947f9ZJ9seql3Lk_CzW2li7NE5IdT8qw5XMozsg-Xzm2vEpc9Ap6ah102j3k7lt4fvlvJAOz4PQqEC6vF3AbEc2r7vQitggk0Qo6H9b3xMaF30cX1mo-EospvLClYaYt8saw/s1600/unnamed4.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="350" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWu3212U-947f9ZJ9seql3Lk_CzW2li7NE5IdT8qw5XMozsg-Xzm2vEpc9Ap6ah102j3k7lt4fvlvJAOz4PQqEC6vF3AbEc2r7vQitggk0Qo6H9b3xMaF30cX1mo-EospvLClYaYt8saw/s1600/unnamed4.png" /></a></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The 3 Simple Moving Average method is usually interpreted as follows: </span><br />
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      </span><br />
<ol>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The first crossover of the quickest SMA (in the example above, the 10-day 
          SMA) across the next quickest SMA (20-day SMA) acts as a warning that prices are 
          reversing trend; however, usually a buy or sell order is not placed yet. </span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The second crossover of the quickest SMA (10-day) and the slowest SMA 
          (50-day) finally triggers the buy or sell signal. </span></li>
</ol>
<span style="font-family: "arial" , "helvetica" , sans-serif;">
      </span><span style="font-family: "arial" , "helvetica" , sans-serif;">There are numerous variants and methodologies for using the 3 Simple Moving 
        Average crossover method, some are provided below:</span><br />
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      </span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">A more conservative approach is to wait until the middle SMA (20-day) 
          crosses over the slower SMA (50-day); but this is basically a two SMA crossover 
          technique, not a three SMA technique. </span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">A money management technique of buying a half size when the quick SMA 
          crosses over the next quickest SMA and then the other half when the quick SMA 
          crosses over the slower SMA. </span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Instead of halves, buy or sell one-third of a position when the quick SMA 
          crosses over the next quickest SMA, another third when the quick SMA crosses 
          over the slow SMA, and the last third when the second quickest SMA crosses over 
          the slow SMA.</span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Moving Average crossovers are important tools in a traders toolbox. In fact 
        crossovers are included in the most popular technical indicators including the 
        Moving Average Convergence Divergence (MACD) indicator (see: MACD). Other moving averages deserve careful consideration 
        in a trading plan.</span><br />
<h1>
<span style="font-family: "arial" , "helvetica" , sans-serif;">3. Exponential Moving Average (EMA)</span></h1>
<br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">The Exponential Moving Average (EMA) weighs current prices more heavily than 
past prices. This gives the Exponential Moving Average the advantage of being 
      <b>quicker to respond to price fluctuations</b> than a Simple 
Moving Average; however, that can also be viewed as a disadvantage because 
the <b>EMA is more prone to whipsaws</b> (i.e. false signals).</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The chart below of eBay (EBAY) stock shows the difference between a 10-day 
      Exponential Moving Average (EMA) and the 10-day regular Simple Moving Average 
      (SMA):</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiWh3i8-CdJ4VdYaI2mFQ2ym3iIwzqkFwV-ZcLG2e729WvSXprBFyYQVW0IVbj0s-f6ToKJWgNnpJ1-W-AEfCSV-PHXIZpvaf1t0N0OWMjzsOqAnxkbFx7JdMY8mtM99QbmZGnUkIRZE8g/s1600/unnamed5.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="350" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiWh3i8-CdJ4VdYaI2mFQ2ym3iIwzqkFwV-ZcLG2e729WvSXprBFyYQVW0IVbj0s-f6ToKJWgNnpJ1-W-AEfCSV-PHXIZpvaf1t0N0OWMjzsOqAnxkbFx7JdMY8mtM99QbmZGnUkIRZE8g/s1600/unnamed5.png" /></a></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The main thing to notice is how much quicker the EMA responds to price 
reversals; whereas the SMA lags during periods of reversal. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    The chart below shows the 
      difference between moving average crossovers (see: Moving Average Crossovers) buy and sell signals with a 
      EMA and a SMA.</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhq9nGcLWlFqg5BiGlvK79ZMYwf_oAA2sRx0ID4uu6wXdCZvNEdNUAhav2fFe1hle6jqLh7BMpj2EVrLoIf6pvi3swD3H3L6kOdwL4YwKVNWJhRREuo0inyCjNuITpt4qHTTQKnex74l2U/s1600/unnamed6.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="350" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhq9nGcLWlFqg5BiGlvK79ZMYwf_oAA2sRx0ID4uu6wXdCZvNEdNUAhav2fFe1hle6jqLh7BMpj2EVrLoIf6pvi3swD3H3L6kOdwL4YwKVNWJhRREuo0inyCjNuITpt4qHTTQKnex74l2U/s1600/unnamed6.png" /></a></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">As the chart above illustrates, even though EMA's are quicker to 
respond to price movement, EMA's are not necessarily faster to give buy and sell 
signals when using moving average crossovers. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
      </span><span style="font-family: "arial" , "helvetica" , sans-serif;">Also note that the concept illustrated in the chart above with Exponential 
        Moving Average crossovers is the concept behind the wildly popular Moving 
        Average Convergence Divergence (MACD) indicator; (see: MACD).</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
      </span><span style="font-family: "arial" , "helvetica" , sans-serif;">Since Exponential Moving Averages weigh current prices more heavily than past 
        prices, the EMA is viewed by many traders as quite superior to the Simple Moving 
        Average; however, every trader should weigh the pros and the cons of the EMA and 
        decide in which manner they will be using moving averages.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
      </span><span style="font-family: "arial" , "helvetica" , sans-serif;">Nevertheless, Moving Averages remain the most popular and arguably the most 
        effective technical analysis indicator out on the market today.</span><br />
<h1>
<span style="font-family: "arial" , "helvetica" , sans-serif;">4. Weighted Moving Average</span></h1>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The Weighted Moving Average places more importance on recent price moves; 
therefore, the Weighted Moving Average <b>reacts more quickly to price changes</b> than 
the regular Simple Moving Average (see: Simple Moving 
Average). A basic example (3-period) of how the Weighted Moving Average is 
calculated is presented below:</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Prices for the past 3 days have been $5, $4, and $8. </span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Since there are 3 periods, the most recent day ($8) gets a weight of 3, the 
        second recent day ($4) receives a weight of 2, and the last day of the 3-periods 
        ($5) receives a weight of just one. </span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">The calculation is as follows: [(3 x $8) + (2 x $4) + (1 x $5)] / 6 = $6.17 </span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The Weighted Moving Average value of 6.17 compares to the Simple Moving 
      Average calculation of 5.67. Note how the large price increase of 8 that occured 
      on the most recent day was better reflected in the Weighted Moving Average 
      calculation.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The chart below of  stock illustrates the visual difference between a 
      10-day Weighted Moving Average and a 10-day Simple Moving Average:</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHUuS-HigmPM-q9Kam99cCGENTBS5jUL7PdXeUhawBIxCuyW4MJ1LwQrorEnAAZb3RJCUqzEVOC0pZd688V4lPRsMeve6wECCDgILFyvolMkPP1eti2hbZsMkl-hI4DdAtyiWxfVRVN48/s1600/unnamed7.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="350" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHUuS-HigmPM-q9Kam99cCGENTBS5jUL7PdXeUhawBIxCuyW4MJ1LwQrorEnAAZb3RJCUqzEVOC0pZd688V4lPRsMeve6wECCDgILFyvolMkPP1eti2hbZsMkl-hI4DdAtyiWxfVRVN48/s1600/unnamed7.png" /></a></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Buy and sell signals for the Weighted Moving Average indicator are discussed in 
depth with the Simple Moving Average indicator (see: Simple Moving Average).</span><br />
<h1>
<span style="font-family: "arial" , "helvetica" , sans-serif;">5. Adaptive Moving Average</span></h1>
<span style="font-family: "arial" , "helvetica" , sans-serif;">Adaptive Moving Averages changes its sensitivity to price fluctuations. The 
Adaptive Moving Average <b>becomes more sensitive during periods when price is 
moving in a certain direction and becomes less sensitive to price movement when 
price is volatile</b>.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The chart below contract shows the 
      difference between an Exponential Moving Average (see: Exponential Moving Average) which weights current 
      prices more heavily than past prices and the Adaptive Moving Average which 
      changes sensitivity based on price volatility:</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjFVGt4YdhO0ZRFGZnUd4riCw5D7EBm-c43Lo2zhyphenhypheneN83UsYnrzBDQjYZPItsQd4p3uCZfbAaS_7ZtuMVEcXBwytfpYnfIn-OYhHCyM-2pSTGGV_Co50Fw2KuHALsLNNM2VNF4JdFwfIOY/s1600/unnamed8.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="350" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjFVGt4YdhO0ZRFGZnUd4riCw5D7EBm-c43Lo2zhyphenhypheneN83UsYnrzBDQjYZPItsQd4p3uCZfbAaS_7ZtuMVEcXBwytfpYnfIn-OYhHCyM-2pSTGGV_Co50Fw2KuHALsLNNM2VNF4JdFwfIOY/s1600/unnamed8.png" /></a></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The advantage of the Adaptive Moving Average is show above in the e-mini chart 
in the center where price became directionless and choppy. During that period 
the Adaptive Moving Average maintained a straight line appearance; whereas, the 
Exponential Moving Average moved with the choppiness of prices. However, when 
price trended, like on the far right of the e-mini chart above, the Adaptive 
Moving Average kept up with the Exponential Moving Average. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The Adaptive Moving Average is definitely an unique technical indicator that 
      is worth further investigation.</span><br />
<h1>
<span style="font-family: "arial" , "helvetica" , sans-serif;">6. Typical Price Moving Average</span></h1>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The Typical Price Moving Average combines the Pivot Point concept and the 
Simple Moving Average. The Pivot Point (see: Pivot Points) calculation is shown 
below:</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Pivot Point</b> = (High + Low + Close) / 3 </span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The calculated Pivot Point number is then inputted into the regular Simple 
      Moving Average (see: Simple Moving Average) 
      equation; rather than the input of the closing price, the Pivot Point 
      calculation is used.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The chart below shows the slight difference between a 10-day Simple Moving Average and a 10-day 
      Typical Price Moving Average:</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAn9bG7ZIjEoIGXbmfV1z5yD6viBcHaUmpcGYx-MN73lWgw27O6RSm_ARH0rmC0VjXKBrW2foW07fMdwGkDImSi-2zdVans1-ULeUxOTFesB-WsruMO2Tyo1bWkRsM60Ja5kgcUBrLzhI/s1600/unnamed9.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="350" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAn9bG7ZIjEoIGXbmfV1z5yD6viBcHaUmpcGYx-MN73lWgw27O6RSm_ARH0rmC0VjXKBrW2foW07fMdwGkDImSi-2zdVans1-ULeUxOTFesB-WsruMO2Tyo1bWkRsM60Ja5kgcUBrLzhI/s1600/unnamed9.png" /></a></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The Typical Price attempts to give a more real representation of where price has 
been by incorporating the high and low price into the most often used closing 
price. The Typical Price is consequently seen as a more pure Simple Moving 
Average; nevertheless, as can be referenced by the chart above, there is not much difference between either Moving Average. Buy and sell signals for the Typical Price Moving Average indicator are 
      discussed in depth on the Simple Moving Average indicator pages (see: Simple Moving Average).</span><br />
<h1>
<span style="font-family: "arial" , "helvetica" , sans-serif;">7. Triangular Moving Average</span></h1>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The Triangular Moving Average is a <b>Simple Moving Average that has been 
averaged again</b> (i.e. averaging the average); this creates an extra smooth Moving 
Average line.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The chart below contract shows the relation 
      between a 10-day Simple Moving Average and a 10-day Triangular Moving 
      Average:</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHzJWNUl7PEhH89utOuFFojkZFclmZp3QI1GLVuS9mXO0HtvPNgQrkj8l0IZlSBoE7FWbmf_8uAC9EiX0smpvMOrpClX5k-oAeBPsx56N0bbeZKE57729fx2v_OZEvKvuiDvGimer3dqk/s1600/unnamed10.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="329" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHzJWNUl7PEhH89utOuFFojkZFclmZp3QI1GLVuS9mXO0HtvPNgQrkj8l0IZlSBoE7FWbmf_8uAC9EiX0smpvMOrpClX5k-oAeBPsx56N0bbeZKE57729fx2v_OZEvKvuiDvGimer3dqk/s1600/unnamed10.png" /></a></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Generally, simple moving averages are smooth, but the re-averaging makes the 
Triangular Moving Average even smoother and more wavelike. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">Buy and sell signals for the Triangular Moving Average indicator are 
      discussed in depth on the Simple Moving Average indicator pages (see: Simple Moving Average).</span></div>
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<h1>
Summary: Moving Averages</h1>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhvaVOvMxPUtMPCfOjYnKZk_Xq_GUQMVw0bS22Gf4tuUNxGhZamQB35vketmgX4TFbDVibWDwxKiDoNfT7KHGaTvT4nOkJXYQnkfSlVrQPmBwRRcO_mK-_zwM2uG3yjfPYcrcQ0aaCe-g/s1600/assets_c-2010-10-summary-moving-averages-thumb-240x240-7595.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="163" data-original-width="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhvaVOvMxPUtMPCfOjYnKZk_Xq_GUQMVw0bS22Gf4tuUNxGhZamQB35vketmgX4TFbDVibWDwxKiDoNfT7KHGaTvT4nOkJXYQnkfSlVrQPmBwRRcO_mK-_zwM2uG3yjfPYcrcQ0aaCe-g/s1600/assets_c-2010-10-summary-moving-averages-thumb-240x240-7595.png" /></a></div>
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<ul style="text-align: justify;">
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">There are many types of moving averages. The two most common 
types are a simple moving average and an exponential moving average.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Simple moving averages are the simplest form of moving averages, but they are susceptible to spikes.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Exponential moving averages put more weight to recent price, which means they place more emphasis on what traders are doing now.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">It is much more important to know what traders are doing now than to see what they did last week or last month.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Simple moving averages are smoother than exponential moving averages.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Longer period moving averages are smoother than shorter period moving averages.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Using the exponential moving average can help you spot a trend faster, but is prone to many fake outs.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Smooth moving averages are slower to respond to price action 
but will save you from spikes and fake outs. However, because of their 
slow reaction, they can delay you from taking a trade and may cause you 
to miss some good opportunities.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">You can use moving averages to help you define the trend, when to enter, and when the trend is coming to an end.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Moving averages can be used as dynamic support and resistance levels.</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">One of the best ways to use moving averages is to plot 
different types so that you can see both long term movement and short 
term movement. </span></li>
</ul>
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">You got all of that? Why don't you open up your charting software and try popping up some moving averages. Remember, using moving averages is easy. The hard part is determining which one to use! That's why you should try them out and figure out which best fits 
your style of trading. Maybe you prefer a trend-following system. Or 
maybe you want use them as dynamic support and resistance. Whatever you choose to do, make sure you read up and do some testing to see how it fits into your overall trading plan. </span></div>
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Moving Averages A moving average is simply a way to smooth out price action over time. By “moving average”, we mean that you are takin...