What are moving averages?




Under technical analysis, indicators have a crucial role to play. Indicators are pattern-based signals made through price, volume, and/or open interest of a security or contract used by traders who follow technical analysis. Indicators are used to forecast price movements. Some examples of common technical indicators are- moving averages, moving average convergence divergence (MACD), relative strength index (RSI), Bollinger Bands and Exponential moving average (EMA).

The moving average (MA) is an indicator used to find out the direction of a current price trend regardless of the short term price fluctuations. The moving average formula as a technical analysis indicator, finds out price data by updating a regular average price. When the moving average is showcased through a price chart, a single/ flat liner removes any differences caused due to changes in price. They do not forecast the direction of price, instead define the current direction in accordance with the past prices. Therefore, it can be said that moving average is a lagging indicator. It is interesting to know that they are the founding stones for other indicators in technical analysis such as Bollinger bands and MACD.

The two major types of moving averages are simple moving average (SMA) and Exponential moving average (EMA). Simple moving average (SMA) is made by calculating the average price of a security over a consistent time period. Moving averages are typically based on closing prices. As the name suggests, SMA is an average that moves. Exponential moving average (EMA) lowers the price lag by stressing more upon the recent prices. EMA and SMA differ on the pretext that EMA places a greater degree of emphasis on previous data points, making data more inclined towards new information.

Click here to know more about moving average formula.

Comments

Post a Comment

Popular posts from this blog

CFA V/s CA

Image
  CFA (Chartered Financial Analysts)  and CA (Chartered Accountancy) are two important courses in finance domain. Both are excellent courses and unique in their own way. Choosing a professional certification between both courses is dependent upon your interest and qualification. To decide which course to pursue, one should know all about CFA and CA in terms of courses, advantages.  CFA certification or Chartered Financial Analyst is a program conducted by CFA institute, California.  The program aims to provide professional training and education in the field of finance and investment analysis. To avail the CFA certification, one must pass three levels of CFA examination. CFA is a globally recognized certification program. The average salary package for a CFA charter holder is 12,00,000-20,00,000. Some of the common job profiles for a CFA charterholder include portfolio manager, consultant, investment analyst, strategist, wealth manager etc. CA or Chartered Accountancy is a certified qu
Read more

What is CFA Course all about?

Image
CFA stands for Chartered Financial Analyst. It is a globally-recognized professional certification program that gives a strong base to students in the field of finance. It is considered gold standard in finance. Students and professionals who are willing to make their career in investment banking, equity research, capital market, portfolio management, corporate finance etc., should pursue  CFA course . CFA program  is conducted by CFA institute. The institute was established in 1947. The CFA course has come up as the top qualification in investment industry. The main requirement to become a CFA charter is clearing all three levels of the CFA exam and meeting relevant work experience requirements. The exam covers important topics for investment industry such as equity, fixed income, private equity, derivatives and real estate. If you want to receive top quality investment education, then getting a CFA certification is the best career choice for you. This is one of the most reputed desig
Read more

CFA Mock exams and practice questions

Image
  Someone very rightly said- “a dream doesn’t become reality through magic, it takes sweat, determination and hard work.” Earning the global finance designation isn’t an easy path. It takes a lot of passion, determination, hard work and diligence to become a chartered financial analyst.  CFA course  regarded as the highest distinctions in the investment management profession equips one with the appropriate skills and expertise required to survive in the domain of finance. To hold the CFA charter, one must pass all three levels of CFA exam. Preparing for the CFA level 1 exam requires thorough study and perseverance. To ease the process of preparation, CFA Institute, California, provides mock exams and practice questions. CFA mock test are an important way to be acquainted with the format and data of the exam. It enables one to know the topics to be studied, prioritize the time to be given for each question. Attempting more CFA practice questions and mock tests helps one become more comf
Read more