Technical Analysis Part II

The stock market has opened again!

I'm gonna share about one of the Technical Analysis Indicators which is called Moving Average. This indicator has been widely used by most of the Technical Analysts. It is a very important indicator to identify the Major Trend Reversal Signal as well.

With the help of the software (I'm using Chartnexus), we will be able to calculate the Moving Average Lines on the computer. This is the formula of how the Moving Average is calculated.

For example, a 20-day moving average is calculated by taking the first 20 days price data and find the first averaged figure A. Afterwards, to you have to take another next 20days data to find another averaged figure B.  The process continues like this....

First Average Figure A: Sum(Day1 - Day 20) / 20
Second Average Figure B: Sum(Day2 - Day 21)/ 20
Third Average Figure C: Sum(Day3 - Day 22)/20

And so on.............

However, this is just a brief description of how the moving average line was formed in the chart. It is considered as a lagging indicator rather than trend prediction. As I said in the KLCI futures Prediction, Moving average is too general to Predict the Minor changes.

MOVING AVERAGE CROSSOVERS

Sell Signal

A sell signal is triggered when the 10-day moving average crosses below the 20-day moving average.

Buy Signal

A buy signal is triggered when the 10-day moving average crosses above the 20-day moving average

However, we can't rely solely on this indicator only because its too GENERAL and it generates quite a number of false signal. This indicator would be more effective if it is applied on Fast Moving Stocks because they are more sensitive towards price changing compare to KLCI Futures.

If you would like to know more about other indicators! Do follow up my NEXT post.

with your friends who you think they might be interested :)