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Moving average |
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Moving averageMoving averages are one of the oldest and most popular of technical analysis tools. A simple moving average is calculated by adding together the closing prices of a financial instrument over a certain number of days and then dividing the sum by the number of days involved. So, for example, the seven day average for a share price would be calculated by taking seven days worth of data, adding them together and dividing by seven.To calculate the *moving* average:Start by taking the first seven days worth of data and calculating the average value. This is your first point on the moving average chart.Then add the prices for Days 2-8 together and divide by 7. This is the second point on your moving average chart. Continue doing this for Days 3-9, 4-10 and so on, each time plotting the average on the chart. You now have a moving average chart.There are lots of ways of interpreting moving averages. The most basic is to treat a change of direction in the moving average as a signal to buy or sell, so if the moving average has been consistently rising and then it falls, that is a signal to sell.The classical interpretation, used by most technical analysts, is to compare the moving average with the price of the underlying share and to plot them both on the same graph. Before the share price rises above its moving average, buy the share; when it falls below its moving average, sell the share. That is putting it in extremely simple terms, and for a more sophisticated understanding, read one of the many books on the subject. An analyst would normally also consider other types of indicator before making a decision.Similar MatchesAverage propensity to consumeAverage propensity to consumeThe fraction of total (or perhaps disposable) income spent on consumption. Contrasts with marginal propensity to consume. Free of Particular AverageFree of Particular AverageMarine cargo insurance that does not cover partial losses or partial damage unless caused by the vessel being sunk, stranded, burned, on fire, or in a collision. Dow Jones Industrial AverageDow Jones Industrial AverageOne of the main USA share indices which monitors the movement of 30 industrial companies traded on the New York Stock Exchange.The Dow Jones Industrial Average has just been joined by a new index, the Dow Jones Total Market Index, which covers a much broader range of companies. Volume weighted average priceVolume weighted average priceA calculation performed by the London Stock Exchange to set closing prices for shares traded on the SETS order book system.In simple terms, the value of trades is divided by the volume over a given period. The LSE uses a closing 10 minute VWAP to set closing prices on SETS. Simple moving averageSimple moving averageThe mean, calculated at any time over a past period of fixed length. Further SuggestionsLipper Mutual Fund Industry Averageexponential moving average Weighted average life Average propensity to import Weighted average Coupon Average accounting return average price Trade-weighted average tariff Weighted average remaining maturity Weighted average maturity Average Directional Movement Average daily balance Average collection period, or days receivables IBCs money fund report average Average tax rate Nikkei stock average Average propensity Average cost Average cost average true range bands Average product Average rate of return (ARR) Import-weighted average tariff Average tariff Arithmetic average (mean) rate of return |
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