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Simple Moving Averages

Simple moving averages are initially calculated by starting with the left most period in the data and adding up the specified prices (open, high, low, close, mid-point, or average) for the chosen number of periods. This total is then divided by the number of periods set in the Parameters menu.

Formula:

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Where:

n = number of bars

Pt = selected calculation price

Pt-1 = selected calculation price 1 period ago

Pt-n = selected calculation price n periods ago

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This calculation can be simplified for all but the first point. Rather than using all prices to calculate each moving average value, the oldest price can be subtracted from the running total. The newest price can then be added to the difference. The resulting sum is then divided by the number of periods. The quotient is the new point, or simple moving average.

Formula:

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Where:

n = number of bars

MAt-1 = previous moving average value

Pt = current price

Pt-n+1 = oldest price in series

see, P. J. Kaufman, The New Commodity Trading Systems and Methods, New York: John Wiley & Sons, 1978, pp. 58-64.

See also:

Exponential Moving Averages

Hamming Moving Averages

Modified Moving Averages

Weighted Moving Averages

Simple Moving Averages Function