MA

Moving average

Price history of stocks contains lots of fluctuation. This fluctuation may create some problem in analysis. Moving average is a method that helps in reducing fluctuation. Stockalyze supports variety of Moving Averages and MA indicator is a collection of all other moving average indicators. One moving average indicator differ by another in the method used to calculate moving average. We will not go in detail about the method of calculation but we will just learn how to interpret indicators.

Input to MA is number of period and type of moving average.

Note: - Moving average reduces fluctuation but it also introduces lag in data. Try plotting 20 day moving average in Stockalyze and observe that moving average curve appears to be shifted towards right from the price. This shift is proportional to the number of period for which moving average is plotted. The reason why we have so many different kind of moving average is that different moving average offers different lag.

INTERPRETATION:

  • Use it instead of price data. Since stock price contains lots of fluctuations, a short period MA, which will closely follow price data, can be used instead of price data itself.
  • To understand price trend. Plot MA with different period value. If shorter period MA is above longer period MA then trend is upside otherwise it is downside.
  • As Buy/Sell signal. If shorter period MA crosses longer period MA from below and moves upward then a buy signal is generated. If shorter period MA crosses longer period MA from above and moves downward then a sell signal is generated. For better understanding plot 20 day and 50 day moving averages and see if their crossovers has any link with price movement.
  • As support and resistance line. A longer period MA acts as support/resistance line. For example 200 day moving average can be used as support/resistance line.

Related Indicators: DEMA, EMA, KAMA, MAMA, MAVP, SMA, T3, TEMA, TRIMA, WMA

See Also: MACD

Positive SSL