Stocks & Commodities V. 23:2 (22-27): Sidebar: MOMA and Excel by Stephan Bisse Simple moving averages are great tools for filtering out noise from time series, but all they can do is show where a time series has been. The only way that a moving average can point the way to market direction is if additional information — a leading indicator for that time series — is included in the calculation. One way of doing this is adjusting each datapoint in the lookback period by the absolute move that preceded each datapoint as a percentage of the sum of all the absolute moves in the lookback period. If the premise that large moves in a given direction are harbingers of a new trend in the same direction is correct, then the move-adjusted moving average (MOMA) will be a superior indicator of future market direction when compared to a simple moving average. |
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