What is the moving average and how should it be analyzed?

For the technical school, there are many indicators that can provide operational reference. Let's talk about MACD and how to analyze it?

Moving average (MACD) is a kind of technical index which is widely used. It is simple in structure, objective and fair, not easy to operate the fraud line, favored by many investors.
The so-called "moving average" refers to the arithmetic average over a period of time, usually with the closing price as the calculation value. The formula is: MA (n) = (the closing price of the first day + the closing price of the second day + - + the closing price of the nth day) + n. for example, add the closing price of a certain day with the closing price of the previous 9 trading days, and then divide it by 10 to get the 10 day moving average line value MA (10) of the day.
According to the number of days used to calculate the moving average, the moving average can produce results of different dates. The common ones are: the short-term moving average (weekly line), that is, MA (5) takes five trading days of a week as the cycle moving average, the medium-term moving average (monthly line), that is, MA (30) takes one month as the cycle moving average; the long-term moving average (annual line), that is, MA (280) takes the sum of all trading days in a year as the cycle moving average.
There are also some stock technical analysis software support moving average line, such as MA (5), MA (10), MA (30), MA (65), MA (100), MA (200), etc.
By observing the moving average, we can judge the long short tendency of the market. Usually, the long, medium and short-term moving averages are drawn together. If the three moving averages rise side by side, it indicates that the market presents a pattern of long positions occupying the e front; on the contrary, if the three moving averages fall in parallel, the market presents a pattern of short positions occupying the upper front. The moving average can identify the end or reversal of the old market trend and the opportunity of the new market. It can not lead the market, but can faithfully reflect the market situation and trend. Because the moving average is a smooth curve, it can effectively filter out the small flicker, so it can objectively reflect the market trend.
Moving average uses eight principles:
1. The stock price breaks through the moving average upward, but soon returns to below the average line. The moving average still maintains the downward trend, which is the selling signal.
2. The moving average changes from the downward trend to the upward trend, and the stock price breaks through the average line from the below direction of the moving average as the buying signal.
3. The moving average changes from upward trend to trading or falling, and the closing price on the last day falls to break the average, which is the selling signal.
4. It is a buying signal that the stock price is above the moving average and falls short-term but does not cross the moving average downward.
5. The stock price falls below the moving average, but soon returns to the moving average. The moving average still keeps on rising trend, which is a buying signal.
6. If the stock price is below the moving average, it will go up in the short term but not break through the moving average line and turn down immediately.
7. The stock price soars upward, breaks through the moving average line, and is far away from the moving average line, which is the selling signal. 8. The stock price plummets, falls below the moving average line, moves away from the moving average line, is the buying signal.
In addition to the moving average calculated by closing price, there are other moving averages, such as weighted moving average and cost moving average.
The weighted moving average can be divided into doomsday weighted moving average, linear weighted moving average, ladder weighted moving average and square coefficient weighted moving average.
The moving average of cost is the sum of transaction amount in n days divided by the sum of trading volume in n days, that is, the average price in n days. It can reflect the real cost price of the stock. The deviation degree between the value and the current price can more accurately reflect whether the current price deviates from the widely accepted price in the market.

Was this article helpful?

0 out of 0 found this helpful