The moving average is considered a classic among the chart technology indicators (GD or Moving Average). This is mainly due to its versatility. Investors and investors can make this indicator most frequently used by technical analysts in a very different way for their purposes. In addition, it himself is the basis for a variety of other indicators as well as the basis or even an exclusive part of complete trading systems.
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There are various ways to calculate a moving average. The most common is the arithmetic or simple sliding average (simple moving average – SMA). Here, all the final courses of a period considered are simply added up and then divided by the number of closing courses. This means that each individual closing course has the same influence on the result. The course of the course is smoothed by the average line calculated in this way. The average line is sliding because the oldest course in the calculation is eliminated with every new course in the time series. Some technical analysts do not prefer the simple moving average, but a so -called weighted, sliding average. This measures the younger courses a higher weight than the older in the period. As a result, the average line reacts faster to a change in direction in the price curve, but also loses part of its smoothing property. This weighting can be mathematically brought about in different ways. With the linear weighted sliding average (Weighted Moving Average – WMA), the closer closing courses are multiplied by a higher weighting factor than the further closing courses, with the weighting factor decreasing linearly until the oldest closing course. With the exponential moving average (exponential moving average-EMA), the entire existing final course data series always flows into the calculation. The set period length only serves to determine the weighting factor. At the EMA, too, the latest course is given a higher weight than the older one. The EMA is preferred in the area of the indicator calculation (example: MACD-indicator for the collapse/apart of the moving average) as well as in automated trading systems, while the SMA is the favorite among technical analysts in visual (discretionary). Frequently used period lengths in all times and all types of moving average are 20, 50, 100 and 200. In the daily -type, the GD 200 enjoys very special attention among investors because it stands for the long -term market trend. In the area of the weekly chart, the GD 40 is often used because it corresponds to the GD 200 in the daily type.