8.1 Overview We knew about the volumes in the previous chapter and learnt how it helps to determine a trend. In this chapter we will get to know the moving averages. We all have read about average in mathematics textbooks and this is just an extension of averages. To determine average, we add the closing price of a stock for 10 days and divide it by ten (the number of days). Similarly, we determine the moving average by determining the average closing price for last ten days. On the eleventh days, we will exclude the closing price for day 1 and include the closing price for day 11. This average will show some fluctuation on every coming day, hence is called moving averages. 8.2 Introduction Moving averages are indicators that pave or soften a greater or …show more content…
- Moving averages adjusted volume. - Moving averages variables. - Moving averages time series. While the moving averages used are more simple, the weighted and exponential. 8.5 Combination of Signals When the market is trending, such indicators tend to give good signals and allow you to enter the market early giving you the chance to grab most of the movement. However during consolidation periods, a system of moving averages crossings offers many false signals. Therefore it is important to determine in advance the trend in each scenario. If there is any trend so we use a system that serves during the periods of that trend, if there is no any trend so we use another system to serve in periods of consolidation. Remember that signals that we get about moving averages are very sensitive to the number of periods chosen. Taking short periods, our system allows us to get to market faster and will have more signs, but also will have many false signals. If, on the other hand, if we choose longer periods, we will have fewer signs and we will come later, but our signals will be more accurate. In the nest chapters, we will discuss various technical indicators and their impact on