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At 09:50 PM 8/16/98 -0700, Hans T. Hingst wrote:
>Would you please explain the purpose of shifting a moving average? What is
>the advantage or benefit? Thank you.
>
>Hans
Hans,
One benefit of displacing a moving average is to reduce whipsaw,
without the disadvantages introduced by slowing the speed
of the moving average.
Compare a daily chart with a 7-day moving average (simple, not exponential),
to the same chart with the same 7-day moving average displaced 5 days
to the right. You will see reduced whipsaw. Another way to reduce
whipsaw is to have a longer (slower) moving average. So now compare
the above 2 moving averages to a slower one (say 21 day or 40 day).
You will see that the displaced moving average reduces whipsaw
WITHOUT delaying the trend change signal as much as a slow moving average
delays the signal of trend change. (That is, if you define trend
change as a crossing of the moving average by price).
These displaced moving averages form the basis of trend definition
in my trading.
Best wishes,
-Neal.
---
DiNapoli Fibonacci techniques -
http://www.fibtrader.com
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