What is Moving Average & difference between the moving average?

What is Moving Average & difference between the moving average?

The yellow line is Simple Moving Average
Green line is Exponential Moving Average
The Blue line is Weighted Moving Average

moving average is commonly used with time-series data to smooth short-term fluctuations and to highlight long-term trends or cycles. The difference between short-term and long-term will depend on the method and the parameters of the moving average will be defined accordingly. For example, it is often used in the technical analysis of financial data, such as stock prices, dividends or trading volumes.

Above we are giving the difference between moving average method help of chart using the same period of moving average 20 days.

Simple moving average

In financial applications, the simple moving average (SMA) is the unweighted average of the previous n results. For science and engineering, however, the mean is typically calculated from the same amount of data on each side of the main value. This ensures that mean variations are aligned with data variations rather than shifted in time.

The period selected depends on the type of movement of importance, e.g. short, moderate or long-term. In financial terms, moving-average levels can be viewed as encouragement for a falling market or resistance to a rising market.

Weighted moving average

The Weighted Moving Average places more weight on recent data and less weight on past data. This is done by multiplying the price of each bar by a weighting factor. Due to its unique calculation, WMA will follow prices more closely than the corresponding Simple Moving Average.

Exponential moving average

The exponential moving average (EMA), also known as the exponentially weighted moving average (EWMA), is a first-order infinite impulse response filter that applies weighting factors that decrease exponentially.

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