Stocks & Commodities V. 25:2 (20-26): Anticipating Moving Average Crossovers by Dimitris Tsokakis

Item# \V25\C02\023TSOK.pdf
\$3.95
Availability: In Stock

Product Description

Stocks & Commodities V. 25:2 (20-26): Anticipating Moving Average Crossovers by Dimitris Tsokakis

Although simple moving averages may be a technical analyst’s best friend, they do tend to lag. Here’s how you can overcome this problem.

Moving averages are excellent indicators to confirm existing trends in spite of their lag. To overcome this lag, several alternatives such as the exponential moving average (EMA) and the weighted moving average (WMA) have been applied to price charts. In this article, I will not tweak the simple moving average (SMA). Instead, I will decrease the lag of the SMA crossover by one day by basing it on a simple mathematical observation.

SIMPLE MOVING AVERAGE CROSSOVER

First, I would like to show you an arithmetic example. A five-day simple moving average (MA5) is the average of the last five closing values:

MA5 = (C + C-1 + C-2 + C-3 + C-4)/5 = C/5 + (C-1 + C-2 + C-3 + C-4)/5 [A1]

In a similar fashion, a four-day SMA is:

MA4 = (C + C-1 + C-2 + C-3)/4

Its previous value is:

MA4-1= (C-1 + C –2 + C –3 + C –4)/4

or 4*MA4-1= C-1 + C –2 + C –3 + C –4

or 4* MA4-1/5=( C-1+C –2+C –3+C –4)/5

If you replace (C-1 + C-2 + C-3 + C-4)/5 in [A1] you get:

MA5 = C/5 +4*MA4-1/5 or MA5=(C+4*MA4-1)/5 [A2]

FOR THOSE ORDERING ARTICLES SEPARATELY:
*Note: \$2.95-\$5.95 Articles are in PDF format only. No hard copy of the article(s) will be delivered. During checkout, click the "Download Now" button to immediately receive your article(s) purchase. STOCKS & COMMODITIES magazine is delivered via mail. After paying for your subscription at store.traders.com users can view the S&C Digital Edition in the subscriber's section on Traders.com.

 Take Control of Your Trading. Professional Traders' Starter Kit All these items shown below only \$299.99! 5-year subscription to Technical Analysis of STOCKS & COMMODITIES, The Traders' magazine. (Shipping outside the US is extra. Washington state addresses require sales tax based on your locale.) 5 year access to S&C Archive 5 year access to S&C Digital Edition5-year subscription to Traders.com Advantage. 5-year subscription to Working Money. Free book selection. Click Here to Order