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Moving Averages
« Reply #-1 on: October 31, 2008, 02:55:17 PM »
Moving Average - MA

 An indicator frequently used in technical analysis showing the average value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance.


 
 
 Moving averages are used to emphasize the direction of a trend and to smooth out price and volume fluctuations, or "noise", that can confuse interpretation. Typically, upward momentum is confirmed when a short-term average (e.g.15-day) crosses above a longer-term average (e.g. 50-day). Downward momentum is confirmed when a short-term average crosses below a long-term average.
 

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Moving Averages
« Reply #-1 on: October 31, 2008, 02:55:17 PM »

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Re: Moving Averages
« on: October 31, 2008, 02:56:48 PM »
 How are moving averages used in trading?

--------------------------------------------------------------------------------
 
 
Moving averages are very popular tools used by technical traders to measure momentum. The main purpose of these averages is to smooth price data so traders can be in a better position to gauge the likelihood that a current trend will continue. Moving averages are commonly used to predict areas of support and resistance and are also used in conjunction with other indicators to help give more accurate entry/exit signals. There are different types of averages that vary in popularity but, regardless of how they are calculated, they are all interpreted in the same manner.

A crossover is a popular trading signal that occurs when the price of an asset crosses through a moving average, or two moving averages cross over each other. This type of signal is regarded as an early indication of the direction of future momentum. For example, traders wishing to enter into a long position will buy an asset when the price crosses above a moving average and sell the asset when it crosses below. As you can see from the chart below, upward momentum increases when a short-term average crosses above a long-term average.

 

Moving averages are often used to predict areas of support and resistance. As you can see from the diagram above, the price of an asset often finds support at major averages such as the 50/200 daily moving averages. Traders use these averages to help them to choose strategic areas to set price targets or stop-loss orders. Many traders exit their positions once the price of the assets falls bellow major moving averages because it suggests that downward momentum is likely to increase.

The smoothing characteristics of moving averages are often applied to other technical indicators to help reduce the chance of getting a false transaction signal. A short-term average is often applied to indicators such as the stochastic oscillator, moving average convergence divergence (MACD), price rate of change (ROC) and on-balance volume (OBV) to generate transaction signals. This average is known as a trigger line and transactions are made when the indicator crosses through this average. In general, long positions are taken when the indicator crosses up through the trigger line and short positions are taken when it crosses down.

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Re: Moving Averages
« Reply #1 on: November 21, 2008, 10:22:04 PM »

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Re: Moving Averages
« Reply #2 on: January 17, 2009, 03:59:18 PM »
results of 3 moving averages on forex commodities and stock indices
10 50 and 200 day moving averages were used


forex




commodities




indices





MAV

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Re: Moving Averages
« Reply #3 on: August 17, 2009, 04:23:02 PM »
Here is a an introductory document on how to use moving average for trading.

http://www.mediafire.com/?mknmj4nft4y

Offline Raja Yasir

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Re: Moving Averages
« Reply #4 on: August 19, 2009, 06:25:18 PM »
Here is a an introductory document on how to use moving average for trading.

http://www.mediafire.com/?mknmj4nft4y

how to open this file i use power point but it didnt open

any solution ?

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Re: Moving Averages
« Reply #5 on: August 19, 2009, 10:02:52 PM »
Here is a an introductory document on how to use moving average for trading.

http://www.mediafire.com/?mknmj4nft4y

how to open this file i use power point but it didnt open

any solution ?


it should open in power point
the version of power point might be creating problems


MAV

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Re: Moving Averages
« Reply #6 on: August 21, 2009, 11:04:31 PM »
It is a self-running slide show created with PP 2007.

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Re: Moving Averages
« Reply #7 on: September 15, 2009, 02:15:01 PM »
Trend-Following Indicator


Moving averages smooth out a data series and make it easier to identify the direction of the trend. Because past price data is used to form moving averages, they are considered lagging, or trend following, indicators. Moving averages will not predict a change in trend, but rather follow behind the current trend. Therefore, they are best suited for trend identification and trend following purposes, not for prediction.

When to Use
Because moving averages follow the trend, they work best when a security is trending and are ineffective when a security moves in a trading range. With this in mind, investors and traders should first identify securities that display some trending characteristics before attempting to analyze with moving averages. This process does not have to be a scientific examination. Usually, a simple visual assessment of the price chart can determine if a security exhibits characteristics of trend.

In its simplest form, a security's price can be doing only one of three things: trending up, trending down or trading in a range. An uptrend is established when a security forms a series of higher highs and higher lows. A downtrend is established when a security forms a series of lower lows and lower highs. A trading range is established if a security cannot establish an uptrend or downtrend. If a security is in a trading range, an uptrend is started when the upper boundary of the range is broken and a downtrend begins when the lower boundary is broken.

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Re: Moving Averages
« Reply #9 on: December 27, 2009, 02:52:56 PM »
widely used set of moving averages
20 and 50 for short term
50 and 200 for long term

Toshi

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Re: Moving Averages
« Reply #10 on: December 27, 2009, 03:07:21 PM »
Moving Averages
Introduction
Moving averages are one of the most popular and easy to use tools available to the
technical analyst. They smooth a data series and make it easier to spot trends,
something that is especially helpful in volatile markets. They also form the building
blocks for many other technical indicators and overlays.
The two most popular types of moving averages are the Simple Moving Average
(SMA) and the Exponential Moving Average (EMA).

Toshi

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Re: Moving Averages
« Reply #11 on: December 27, 2009, 03:12:45 PM »
Simple Versus Exponential;Which is better?

Which moving average you use will depend on your trading and investing style and
preferences. The simple moving average obviously has a lag, but the exponential
moving average may be prone to quicker breaks. Some traders prefer to use
exponential moving averages for shorter time periods to capture changes quicker.
Some investors prefer simple moving averages over long time periods to identify
long-term trend changes. In addition, much will depend on the individual security in
question.
Moving average type and length of time will depend greatly on the individual security and
how it has reacted in the past.


Shorter moving averages will be more sensitive and generate more signals. The EMA, which is generally more
sensitive than the SMA, will also be likely to generate more signals. However, there
will also be an increase in the number of false signals and whipsaws. Longer moving
averages will move slower and generate fewer signals. These signals will likely prove
more reliable, but they also may come late. Each investor or trader should
experiment with different moving average lengths and types to examine the tradeoff
between sensitivity and signal reliability.

Toshi

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Re: Moving Averages
« Reply #12 on: December 27, 2009, 03:16:44 PM »
Moving averages as Trend-Following Indicator
Moving averages smooth out a data series and make it easier to identify the
direction of the trend. Because past price data is used to form moving
averages, they are considered lagging, or trend following, indicators.
Moving averages will not predict a change in trend, but rather follow behind
the current trend. Therefore, they are best suited for trend identification
and trend following purposes, not for prediction.

When to Use
Because moving averages follow the trend, they work best when a security is
trending and are ineffective when a security moves in a trading range.
With this in
mind, investors and traders should first identify securities that display some trending
characteristics before attempting to analyze with moving averages. This process
does not have to be a scientific examination. Usually, a simple visual assessment of
the price chart can determine if a security exhibits characteristics of trend.
In its simplest form, a security's price can be doing only one of three things:
trending up, trending down or trading in a range.
An uptrend is established when a security forms a series of higher highs and higher lows.
A downtrend is established when a security forms a series of lower lows and lower highs.
A trading range is established if a security cannot establish an uptrend or downtrend.

If a security is in a trading range, an uptrend is started when the upper boundary of the range is
broken and a downtrend begins when the lower boundary is broken.

Toshi

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Re: Moving Averages
« Reply #13 on: December 27, 2009, 03:21:02 PM »
Moving Average Settings
Once a security has been deemed to have enough characteristics of trend, the next task will be to select the number of moving average periods and type of moving average. The number of periods used in a moving average will vary according to the security's volatility, trendiness and personal preferences. The more volatility there is, the more smoothing that will be required and hence the longer the moving average.
Stocks that do not exhibit strong characteristics of trend may also require longer moving averages. There is no one set length, but some of the more popular lengths include 21, 50, 89, 150 and 200 days as well as 10, 30 and 40 weeks.
Short-term traders may look for evidence of 2-3 week trends with a 21-day moving average,while longer-term investors may look for evidence of 3-4 month trends with a 40-week moving average.
Trial and error is usually the best means for finding the bestlength. Examine how the moving average fits with the price data. If there are too
many breaks, lengthen the moving average to decrease its sensitivity. If the moving average is slow to react, shorten the moving average to increase its sensitivity. In addition, you may want to try using both simple and exponential moving averages.
Exponential moving averages are usually best for short-term situations that require a
responsive moving average.

Simple moving averages work well for longer-term
situations that do not require a lot of sensitivity.

Toshi

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Re: Moving Averages
« Reply #14 on: December 27, 2009, 03:28:56 PM »
Uses for Moving Averages

There are many uses for moving averages, but three basic uses stand out:
• Trend identification/confirmation
• Support and Resistance level identification/confirmation
• Trading Systems

Trend Identification/Confirmation
There are three ways to identify the direction of the trend with moving averages:
direction, location and crossovers.

1)The first trend identification technique uses the direction of the moving average to
determine the trend. If the moving average is rising, the trend is considered up.
 If the moving average is declining, the trend is considered down. The direction of a
moving average can be determined simply by looking at a plot of the moving
average or by applying an indicator to the moving average. In either case, we would
not want to act on every subtle change, but rather look at general directional
movement and changes.

2)The second technique for trend identification is price location. The location of the
price relative to the moving average can be used to determine the basic trend. If the
price is above the moving average, the trend is considered up. If the price is below
the moving average, the trend is considered down.

3)The third technique for trend identification is based on the location of the shorter
moving average relative to the longer moving average. If the shorter moving
average is above the longer moving average, the trend is considered up. If the
shorter moving average is below the longer moving average, the trend is considered
down.

Support and Resistance Levels

Another use of moving averages is to identify support and resistance levels. This is
usually accomplished with one moving average and is based on historical precedent.
As with trend identification, support and resistance level identification through
moving averages works best in trending markets.

Conclusions

Moving averages can be effective tools to identify and confirm trend, identify support and resistance levels, and develop trading systems. However, traders and investors should learn to identify securities that are suitable for analysis with moving averages and how this analysis should be applied. Usually, an assessment can be made with a visual examination of the price chart, but sometimes it will require a more detailed approach.

The advantages of using moving averages need to be weighed against the disadvantages. Moving averages are trend following, or lagging, indicators that will always be a step behind. This is not necessarily a bad thing though. After all, the trend is your friend and it is best to trade in the direction of the trend. Moving averages will help ensure that a trader is in line with the current trend. However,markets, stocks and securities spend a great deal of time in trading ranges, which render moving averages ineffective.

Once in a trend, moving averages will keep you in, but also give late signals. Don't expect to get out at the top and in at the bottom
using moving averages. As with most tools of technical analysis, moving averages should not be used on their own, but in conjunction with other tools that complement.

gumnam

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Re: Moving Averages
« Reply #15 on: November 04, 2010, 12:21:17 AM »
:bhangra:

Ayub

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Re: Moving Averages
« Reply #16 on: January 03, 2011, 09:10:07 PM »
Discovering Keltner Channels and the Chaikin Oscillator

http://www.investopedia.com/articles/technical/03/021903.asp

Ayub

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Re: Moving Averages
« Reply #17 on: January 04, 2011, 08:50:58 AM »
The Keltner Channel and Bollinger Bands

(Please also find an AFL for both Keltner Channel and Bollinger Bands in AFL Section of the forum.)

Channels and bands of various origins have been used to study market price movement by day traders from many disciplines.

The best known day trader who utilizes the Keltner Channels and has published some articles on the topic is Linda Bradford Raschke. Without quoting her verbatim, if you have the multiples set up for a particular day and most, say 90% of the price action stays within the channel, you would be able to spot overbought and oversold signals to work around.   But this explanation also points out what is, for me, the real weakness in using Keltner Channels. 

How do you know, on a daily basis, which multiples of the moving average to use and, for that matter, what time frame is appropriate for the moving average itself.  I suppose with years of experience you might develop the ability to judge the market and set the appropriate variables, but it sounds like a fairly tall order for a novice trader.  Raschke has done work integrating the Average True Range indicator into the moving average with some success, which seems a more accurate methodology to my way of thinking.  The point is simple, though; the Keltner Channel methodology would take some very specific mentoring to be an effective trading tool for your indicator set.  At best, it serves as a nice filtering device for other primary trading indicators. 
There are three steps to calculating Keltner Channels. First, select the length for the exponential moving average. Second, choose the time periods for the Average True Range (ATR). Third, choose the multiplier for the Average True Range.
The first step in calculating the Bollinger Bands is to find the simple moving average. The upper and lower Bollinger Bands are calculated by determining a simple moving average, and then adding/subtracting a specified number of standard deviations from the simple moving average to calculate the upper and lower bands.
There are two differences between Keltner Channels and Bollinger Bands.
First, Keltner Channels are smoother than Bollinger Bands because the width of the Bollinger Bands is based on the standard deviation, which is more volatile than the Average True Range (ATR). Many consider this a plus because it creates a more constant width. This makes Keltner Channels well suited for trend following and trend identification.
Second, Keltner Channels also use an exponential moving average, which is more sensitive than the simple moving average used in Bollinger Bands.

Instead of using a preset multiple of the SMA the Bollinger Bands set the outer lines at two standard deviations from the center line.  The level of standard deviation can be altered, but the generally accepted norm seems to be about two standard deviations.  So we are dealing with a non-linear outer line formation now, since the standard deviation changes in size depending upon the position of the center line.  When the market is consolidating, Bollinger Bands tend to draw very close together, showing a very low level volatility.  Conversely, when the volatility is increasing, the bands will swing wildly away from each other and the width between the outer bands becomes greater.

Contrasting this with the more equidistant demeanor of the Keltner Channel will immediately show the casual day trader the difference in these two indicators.  One is linear, one is non linear, and the reality is that they appear very different on a chart. 
Oddly enough, though, I consider the Bollinger Band to be a secondary indicator, though there are trading systems that use them as a primary indicator.   The general rule of thought on both the Keltner Channel and Bollinger Bands is fairly simple: a close outside the channel is indicative of overbought and oversold conditions and hence, there is a potential counter-trend trade in the offing.

My experience has been that the Bollinger Bands are more accurate at predicting countertrend moves.  Again, I would use them as a filter device and see if, in fact, my primary indicators show the same information.  I think you could say the same for the Keltner Channel, which I have used less.

Ayub

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Re: Moving Averages
« Reply #18 on: January 04, 2011, 09:09:54 AM »
LINK FOR THE ABOVE KETLNER_BOLLINGER AFL IN AMIBROKER

http://pakinvestorsguide.com/index.php/topic,216.60.html

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