MOVING_AVERAGES7 - MOVING AVERAGES MOVING AVERAGE METHOD IS...

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MOVING AVERAGES
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MOVING AVERAGE METHOD IS THE MOST WIDELY USED METHOD OF IDENTIFYING TREND REVERSAL SINCE THEY DO A GOOD JOB AT ROUNDING UP THE FLUCTUATIONS SO THE TRADERS AND INVESTORS CAN GET A CLEARER VIEW OF THE UNDERLYING TREND. A MOVING AVERAGE IS CONSTRUCTED BY SMOOTHING A PRICE DATA
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EQUAL WEIGHT TO EACH PIECE OF DATA DAILY AND WEEKLY CHARTS
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MORE WEIGHT TO THE MOST RECENT DATA DATA MUCH MORE SENSITIVE TO PRICE CHANGES
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SIMPLE MOVING AVERAGE SIMPLE MOVING AVERAGES ARE CONSTRUCTED BY TOTALING A SERIES OF DATA AND DIVIDING THE TOTAL BY THE NUMBER OF OBSERVATIONS
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NOTICE HOW THE « MA » REVERSES DIRECTION WAY AFTER ITS LOW.
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BULLISH SIGNAL: CROSSES ABOVE THE MA
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BEARISH SIGNAL : CROSSES BELOW THE MA
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THE CHOICE OF TIME SPAN IS CRITICAL WHEN EMPLOYING MOVING AVERAGES TECHNIQUES FIRST STEP IS TO DETERMINE WHICH TREND YOU ARE TRYING TO IDENTIFY: SHORT-TERM , INTERMEDIATE OR LONG DON’T GO FOR THE PERFECTION THAT CANNOT BE ACHIEVED. INSTEAD, LOOK FOR A TIME SPAN THAT WORKS RELATIVELY WELL OVER MOST MARKETS.
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This note was uploaded on 04/14/2010 for the course FINANCE fnce 305 taught by Professor Proftujun during the Spring '10 term at Singapore Management.

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MOVING_AVERAGES7 - MOVING AVERAGES MOVING AVERAGE METHOD IS...

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