# MetaStock Moving Average Function

Provided By www.meta-formula.com

The moving average is probably the most commonly used of all indicators. It comes in various types and has numerous applications. In basic terms though, a moving average helps to smooth out fluctuations in price (or an indicator) and provide a more accurate reflection of the direction that the security is moving. Moving averages are lagging indicators and fit into the trend following category. The various types include simple, weighted, exponential, variable, and triangular.

CALCULATION

The difference between the various types of moving averages is simply the way in which the averages are calculated. For example, a simple moving average places equal weighting on each value in the period; weighted and exponential place more emphasis on recent values in the period; a triangular moving average places greater emphasis on the middle section of the time period; and a variable moving average adjusts the weighting depending on the volatility in the period.

Let's focus on the simple moving average, which is formed by finding the average price of a security over a set number of periods. This is calculated by adding up the closing prices of the security over the set number of periods (eg. 15) and dividing this summed answer by the number of periods.

With regards to the other types of moving averages, their calculations can be a little more complex; however the premise is still the same. The only difference being where and how the relevant weightings are placed.

SYNTAX Mov(Data Array, Periods, E S T TRI VAR W VOL)

Data Array _ This is the data array that will be averaged to form the moving average indicator. This is most often the closing price, but can be any other price data or indicator.

Periods _ This specifies how many periods are used to calculate the moving average.

E S T TRI VAR W VOL _ This is the type of moving average that is to be used, shown as follows:

E _ Exponential S _ Simple T _ Time Series

Tri _ Triangular Var _ Variable W _ Weighted

Vol _ Volume Adjusted

EXAMPLE

The following formula plots a 15 period simple moving average of the closing price:

Mov(C,15,S)

In the above example:

Data Array = C

Periods = 15

Type = S (Simple)

APPLICATION

A more useful application of this example could be:

C>Mov(C,15,S) and V>Mov(V,20,S)

The formula above specifies that the closing price must be above a 15 period simple moving average (denoted by `C>Mov(C,15,S)') and that the present volume must be greater than the 20 period average of the volume (denoted by `V>Mov(V,20,S)').

Looking at Figure 3.27, we can see a 15 period simple moving average applied to the chart.

Figure 3.27 _ Moving Average Indicator

EXERCISES

Construct formulas for the following:

1. The closing price crossing over a 20 period weighted moving average of the close and the 30 period simple moving average of the close is greater than the 50 period simple moving average of the close:

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