Sri Lanka Equity Forum
Dear Reader,

Registration with the Sri Lanka Equity Forum would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
Sri Lanka Equity Forum

Discussion Forum for Stock Market Investors in Sri Lanka

සිංහල පරිවර්තනය
Submit Post
Submit Post

Latest topics

» ඉන්ධන මිල සූත්‍රය මෙන්න
by ruwan326 Yesterday at 7:34 pm

» Daily Foreign Transactions
by ruwan326 Yesterday at 7:29 pm

» Daily Stock Market Update
by Insights Equity Yesterday at 5:53 pm

» Dreams of big profits as marijuana becomes legal in Canada
by janith123 Yesterday at 3:07 pm

» MARKET CRASH - GUARANTEED
by Maharaja Yesterday at 1:57 pm

» $ 1 b from China Development Bank in Sri Lanka today
by ruwan326 Yesterday at 10:20 am

» US Share Market Crash Seems to Good for Sri Lankan/Asian Share Market and Currencies
by Yahapalanaya Yesterday at 9:59 am

» Banking sector profits seen losing steam ahead of 3Q earnings season
by Yahapalanaya Yesterday at 9:50 am

» Dr. Ali Gulamhusein resigns from People’s Leasing board, amid litigation/floundering listed companies
by ruwan326 Yesterday at 7:24 am

» Sri Lanka to revoke rogue bikini ban
by ruwan326 Yesterday at 6:58 am

» ORIENT FINANCE PLC - RATING REVIEW
by ruwan326 Wed Oct 17, 2018 8:43 pm

» CSE WEEKLY
by ruwan326 Wed Oct 17, 2018 8:38 pm

» EPF needs governance overhaul to invest in Sri Lanka stock market
by janith123 Wed Oct 17, 2018 4:58 pm

» MD behave like ANIMAL
by janith123 Tue Oct 16, 2018 4:48 pm

» Sri Lanka may be one of few countries who takes ridiculous tax
by soileconomy Tue Oct 16, 2018 7:50 am

» ALHP WILL MOVE UP SOON
by ruwan326 Tue Oct 16, 2018 7:27 am

» Stock Broker Companies for sale
by janith123 Mon Oct 15, 2018 9:26 pm

» Fresh push to woo UK investors to SL
by ruwan326 Mon Oct 15, 2018 8:03 pm

» Central Bank will intervene if rupee moves on speculation – official
by Yahapalanaya Mon Oct 15, 2018 6:18 pm

» FUTURE WINNING STOCKS AT BOTTOM LEVEL
by Yahapalanaya Mon Oct 15, 2018 6:15 pm

» Nimal returns to stock market
by sapumal Mon Oct 15, 2018 4:53 pm

» Stock price decline leaves John Keells (JKH) vulnerable to a takeover by Sri Lanka’s oligarchs
by ruwan326 Mon Oct 15, 2018 8:08 am

» අනං## මනං ##
by ruwan326 Sat Oct 13, 2018 9:45 pm

» Weekly Stock Market Roundup
by Insights Equity Fri Oct 12, 2018 8:55 pm

» Dealing by directors
by ruwan326 Fri Oct 12, 2018 8:08 pm

» Summary of Key Announcements during the week
by ruwan326 Fri Oct 12, 2018 8:06 pm

» Arjun Alosius and Mano Thittawella
by janith123 Fri Oct 12, 2018 5:29 pm

» Global stock markets plunging, Sri Lanka’s CSE takes no notice - 11 October 2018
by EquityChamp Fri Oct 12, 2018 2:24 pm

» Stock Market Cartoons
by ruwan326 Fri Oct 12, 2018 1:42 pm

» HOW TO STABILIZE RUPEE
by EquityChamp Thu Oct 11, 2018 10:26 pm

You are not connected. Please login or register

Sri Lanka Equity Forum » Stock Market Charts & Graphs » Chart Pattern - The Moving Averages

Chart Pattern - The Moving Averages

Go down  Message [Page 1 of 1]

1 Chart Pattern - The Moving Averages on Sun Apr 24, 2011 8:01 pm

Quibit

avatar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
[You must be registered and logged in to see this image.]

Moving Average is a technical indicator and is used to identify the trend in price movements. The prices of a security are averaged over a period of time and the averages keep on moving with the addition of each new day's price. Moving average could be calculated for any period of your choice depending on your requirement and this is depicted by a trend line.

As for example, if you are looking at a 9 day moving average, you will add the first nine days' closing prices (day 1 - day 9) and divide it by nine (no. of days). That will give you the first point of the Moving Average line. The second point is calculated by adding the closing prices of 2nd to 10th day and dividing it by nine. The process will continue with each new day's price being added to the calculation while the foremost day's price being removed from the calculation. This process will smooth out the day to day price movements of the share and provide the general trend of the price movement.

Longer the period of the moving average the more smoother the price movement is and each new day's price being added would have a lesser impact on the trend. As such, the extreme ups and downs in the price of a share are smoothed out leaving the general trend. If you are interested in the longer term price trend of a share you can select a longer time period like 100 days. On the other hand if your concern is short term price movement you could look at, say, a 15 day moving average.

The above explained Moving Average is called an Arithmetic Moving Average. Another form of moving average is Exponential Moving Average and is calculated by adding a certain percentage of yesterday's moving average to a percentage of the today's closing price. This way you can place more value on the current price than the past data.

Signals from Moving Average

When you look at this graphically, if the price is below the Moving Average line, it is an indication of bearish behavior for the length of the trend and vice versa. Further, if the price is moving from above the Moving Average to below it then it is a bearish indication of the price trend for the time being considered and vice versa. It is important to note that this is a lagging indicator, meaning it will only signal the trend after it has actually starter and as such is a conformational tool.

Another way to generate signals from the Moving Average is to draw two moving averages with two time periods: one for a longer period than the other. Then look for crossover points to help identify periods of significant price changes. Let's look at this graphically.

[You must be registered and logged in to see this image.]

BUY/SELL signal

When a shorter term moving average (18 day Moving Average) crosses from below to above a longer period moving average (50 day Moving Average) it is a bullish signal. That is the trend will be upward and gives a BUY signal. On the other hand, if a shorter term Moving Average crosses down from above a longer term moving average it is a bearish signal and the trend will move downward. This is a SELL signal.

It is considered that the longer the Moving Average (i.e. longer the period) is the more reliable the signals will be and shorter the Moving Average is there will be more false signals or whipsaws. We will also remind you to consider other factors surrounding the company before taking the final BUY or SELL decision.

Sri Lanka Equity Analytics
www.srilankaequity.com

2 Re: Chart Pattern - The Moving Averages on Tue May 01, 2012 1:47 pm

K.Haputantri

avatar
Co-Admin
Thank you GMNET for your contribution.

3 Re: Chart Pattern - The Moving Averages on Tue Dec 06, 2016 10:03 pm

jehovah

avatar
Equity Analytic
Equity Analytic
thanks..

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum