Moving Averages

Introduction Moving Averages:

Moving averages are probably one of the most used indicators. This indicator is widely used but it is poorly used.

The moving average is the average value of a security over a given period (n). The average is about one of the data (during opening, closing, highest, lowest) for each time unit (TU). The choice is often on the closing price. In this case, it is constructed by calculating an average closing price over the period. They say the average is moving as it changes with each UT. It includes the calculation of the average over the past UT and is removed during the calculation of the oldest.

This may be simple or weighted in this case we will assign more importance to certain courses. Thus, there are several types of moving averages:

* Simple Moving Average (or arithmetic)
Exponential Moving Average *
* Moving average "time series"
* Triangular Moving Average
* Variable Moving Average
* Average adjusted by moving the volumes
* Average weighted moving


The difference between these averages is only moving the weight assigned to the data over the period.
We see in this form the most common: the simple moving average and exponential.

The moving average (or moving average: MA) have the advantage of Liser courses and thus help the trader to identify a trend (being above or below the MM) removing excessive fluctuations transitory market. They are often used with indicators to accompany the movements.

It may indicate that over the period considered in the calculation is more short moving average will stick to the trend.
Application to the trading and investment:

There are basically two methods of using moving averages.

* The first is to identify intersections between moving average and courses. The buy signal is triggered when prices cross upward moving average. The sell signal occurs when prices move below the moving average.


The signals are symbolized by purchasing a green arrow, the signals of sales by a red arrow. The purchase is triggered whenever prices move above the simple moving average 50.

* The second mode of intervention is to identify intersections between two moving averages, a relatively short period and another longer period. The intersection of the short moving average above the long moving average trigger the buy signal. The sell signal is given when the short moving average falls below the long MM.



on the graph LAGARDERE above, the crossing of moving averages gives us good signals purchases and sales. This method is particularly interesting for an average investment / long term.

The advantage of these two methods is that they can always act in the direction of the trend.

Question: How do you determine the good times?

The most moving averages are used:
The MMS 200
MME 150
MMS 50
MMS 20

The periods may be different depending on which action is based moving average. To determine the optimal period moving average, it is possible to make several tests with different periods. We observe this behavior when being faced with this moving average. The goal is to find a moving average which acts as a support / resistance.

There is another method for determining the period of our moving average. To do this we must first determine the degree in which our asset moves. It must then divide the length of this cycle by two. It adds 1 to this result.

Period MM = (cycle length / 2) + 1