Moving Average is generally used to identify
or confirm a trend, and works best in trending markets. It will
not signal you that a trend change is imminent, but it will help
you to determine if an existing trend is still in motion and help
you to confirm when a trend reversal has taken place.
Properties
Period. The number of bars in
a chart. If the chart displays daily data, then period denotes days;
in weekly charts, the period will stand for weeks, and so on. The
application uses a default of 9.
Aspect: The Symbol field on which
the study will be calculated. Field is set to "Default",
which, when viewing a chart for a specific symbol, is the same as
"Close".
Interpretation
Moving Averages are one of the most commonly
used technical tools. They follow the trend, smooth the normal fluctuations
of the data, and clearly signal long and short positions to the
investor.
A Moving Average may be displayed as a normal
crossover trading system when you select up to three different averages.
Most investors and charting services use three moving averages.
Their lengths typically consist of short, intermediate, and long-term.
A commonly used system is 4, 9, and 18 intervals. An interval may
be ticks, minutes, days, weeks, or even months; it depends upon
the chart type.
The normal moving average crossover buy/sell
signals are as follows:
A buy signal is flashed when the short
and intermediate term averages cross from below to above the
longer term average.
Conversely, a sell signal is issued when
the short and intermediate term averages cross from above to
below the longer term average.
You can use the crossover approach with only
two moving averages, but market technicians suggest longer term
averages (a longer interval) when trading only two moving averages
in a crossover system.
Introduction
