#TRADING MOVING AVERAGES SERIES#

The linearly weighted moving average (LWMA) Still, it’s always good to know the dynamics behind the indicator’s function. Fortunately, traders do not have to perform this calculation manually as most modern trading platforms compute moving average values automatically. Simply sum the three previous values – which equates to 242.29 – and divide the resulting value by 3, giving a mean of 80.76. To calculate a 3-day SMA, with previous data points of 80.62, 80.65 and 81.02, is straightforward. Calculated by summing a set of equally weighted data points, and then dividing the value by the number of observations in the period, it offers a single value representing a net of pre-determined past values. Sometimes referred to as an arithmetic moving average, the SMA is the most commonly used base in technical analysis. Calculating based on highs, lows and daily means, or any other consistent value, however, is also possible.

The SMA, like most moving averages, base calculations on closing prices. Undeniably, moving averages have stood the test of time and remain a fan favourite within the technical community. Moving averages are particularly potent in markets that have a tendency to trend.

Technical analysts employ moving averages to smooth data over time, allowing a clearer interpretation of the underlying trend.

#TRADING MOVING AVERAGES SERIES#

Statisticians categorise moving averages as part of a family of tools for time series analysis. In the right hands, moving averages (MAs) are an exceedingly influential approach.

Trading moving averages