Letters To S&C by Technical Analysis, Inc.
January's article, "The Gann Quarterly Chart," was the best article I have read in nine months. I can use it
for buying and selling mutual funds for long-term investing.
I would appreciate more articles simply written with actual buy and sell dates for long and intermediate
Could you explain the difference between a 50-day moving average and a 10-week moving average?
DAVID PORTNEY Staten Island, NY
The moving average, a mathematical procedure to smooth or eliminate the fluctuations in data,
emphasizes the direction of a trend and confirms trend reversals, thereby assisting the user in
determining when to buy and sell.
The simple moving average is the arithmetic mean or average of a series of prices over a period of time.
The longer the period of time studied (i.e., the larger the denominator of the average), the less impact an
individual data point has on the average. To find a five-day average, take the sum of the prices from days
1 to 5 and divide by 5. Repeat and plot for a moving average.
The 50-day moving average uses 50 data items (the daily closes), whereas the 10-week moving average
uses only 10 data items (the Friday closes). In effect, the 50-day average provides more information and
may pick up on trend changes sooner, but the 10-week may filter out false breakouts and other
misleading data spikes that may occur during the week.