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What Is the Concept of Moving Average

A stocku2019s moving average enables smoothening the price data through a specified time period by generating an average price that is constantly updated. <br>

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What Is the Concept of Moving Average

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  1. A stock’s moving average enables smoothening the price data through a specified time period by generating an average price that is constantly updated. Trade Zero 204 Church Street SandyPort West Bay Street Nassau Bahamas www.tradezero.co +1-954-944-3885

  2. In stock trading, various tools and indicators are used to help judge the performance of stock in the past. While advanced trading platforms help traders with their innovative solutions, indicators are also essential. Moving Average A stock indicator used commonly in technical analysis. Why Is It Used? A stock’s moving average enables smoothening the price data through a specified time period by generating an average price that is constantly updated. The moving average helps balance out the effects of short-term price fluctuations of the stock during that specified time period. Two Kinds of Moving Averages ●Simple Moving Average (SMA) ●Exponential Moving Average (EMA) Simple Moving Average SMA is calculated by taking the arithmetic mean of a given price set over the past 15 or 30 days, or even the past 100 or 200 days. It could be any specified number of days of the past. (Img source: https://www.investopedia.com/terms/m/movingaverage.asp) ●Here, “n” refers to the number of specified time periods. ●“A “refers to the average in those time periods. www.tradezero.co +1-954-944-3885

  3. Exponential Moving Average Exponential moving average gives more importance to recent prices to be more responsive to the latest information. EMA requires calculating the simple moving average first for a particular period of time. Then you need to compute the multiplier as the weighting factor for the EMA. The formula for this is 2 divided by the specified time period + 1. This multiplier, also called smoothing factor, is combined with the earlier EMA to get to the present value. EMAt = EMA today Vt = Value today EMAy =EMA yesterday s = smoothing d = number of days (Img source: https://www.investopedia.com/terms/m/movingaverage.asp) Since the EMA places greater emphasis on recent data points, the EMA is more responsive to recent price changes. Stock traders therefore go for the EMA rather than the SMA. www.tradezero.co +1-954-944-3885

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