V.9:4 (174-175): Back To Averages by John Sweeney

V.9:4 (174-175): Back To Averages by John Sweeney
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Back To Averages by John Sweeney

Getting back to the subject of averages skimming tops and bottoms of price curves (Settlement, STOCKS & COMMODITIES, February 1991), two readers, C. Skelley of Tucson, AZ, and John Ehlers of Goleta, CA, wrote to explain things to me. In that column, I tried to estimate roughly the effects on an average of lag and attenuation 2 —two factors that positioned the averages along the tops and bottoms of price curves.

Skelley pointed out J.M. Hurst's Profit Magic of Stock Transaction Timing, appendix 4, wherein Hurst estimated the effects for a centered moving average. However, I'm curious about our more usual practice of plotting the average coincidentally with the current price—really, an "advanced" moving average.

Ehlers took on the job straightforwardly, and I am reprinting his note with my own emendations (in italics), because I think John tends to write in the condensed, efficient style of a mathematician that may be tough to understand without pictures and elaboration. If I've confused things, mea culpa! Ehlers writes:


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