Moving Average.

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Presentation transcript:

Moving Average

What is Moving Average? Moving averages - popular tools Low-pass filter data series spot trends

The two most popular moving averages Are SMA and EMA. Simple Moving Average (SMA) Exponential Moving Average (EMA)

SMA (Simple Moving Average) Ex: 5 data point window 10+11+12+13+14 = 60 SMA = 60/5 = 12 Then next data (6th data) coming) 11+12+13+14+15 = 65 SMA =65/5 =13

10 Data SMA

Weighted Moving Average More recent values have A higher weight P1 is most recent

Denominator Denominator is a series that comes to (N**2 + N) / 2

WMA updates

Exponential Moving Average (EMA) reacts faster than SMA Lower lag than SMA recent data has more weight The most used MAs are: SMA(10) SMA(50) SMA(100) SMA(200) EMA(20)

Formula for EMA period-based EMA, "Multiplier" is equal to 2 / (1 + N) where N is the specified number of periods. For 10-period EMA Multiplier is

EMA, the sum

Example of EMA For the first period's EMA, the simple moving average was used as the previous period's exponential moving average (yellow highlight for the 10th period). From period 11 onwards, the previous period's EMA was used. The calculation in period 11 breaks down as follows: (C - P) = (61.33 - 63.682) = -2.352 (C - P) x K = -2.352 x .181818 = -0.4276 ((C - P) x K) + P = -0.4276 + 63.682 = 63.254

EMA why Exponential: