|
|
|
|
 |
|
Simple Moving Averages are a basic statistical device used to smooth out market action over a defined time period. The are calculated by totaling the closing price over n periods and then dividing this total amount by the number of periods n. This final figure then represents the Average price on that day for the past n periods. |
click for a larger image |
Similar to Exponential Moving Averages, Moving averages are commonly used in pairs, with each having a differing period of calculation. The Chart shows the BHP with 2 Moving averages applied ( 10 Day Red| 5 Day Blue). The Crossover events, when the lines crossed over each other indicating a change of trend. Like Exponential Moving Averages, this method is very effective when markets are trending strongly. However without the Exponential smoothing, Crossover events come very quickly when markets are sluggish, giving multiple false calls. Bearing this in mind, Simple Moving averages should only be used as a backup indicator only. |
|
|
|
 |
|
|
