V.6:6 (218-219): More trend detection by Arthur A. Merill

V.6:6 (218-219): More trend detection by Arthur A. Merill
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More trend detection by Arthur A. Merill

Last month I described four methods of trend detection: eyeball, filtered waves, zigzags and support/resistance levels. Here are seven more:

Moving average

This indicator is rather limited when you consider the construction of a moving average. For a new point on a ten-week average, for example, you add the current data unit to the total of the past ten weeks, then subtract the data unit that was added eleven weeks in the past, and divide by 10. You can see that the trend is entirely dependent on the difference between the current data and the data eleven weeks earlier.

In my work, I prefer the exponential average. It's easier to compute than the simple moving average, and it gives more weight to recent data points. The details of this average are in my column in my February column.

Current prices vs. moving averages

A rising trend is indicated when prices are above the moving average or the exponential average. The indication is short term if the average is short term, and long term if the average is long term. Buying and selling points are sometimes at the point of crossover.

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