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CHART SCHOOL..Lesson 101.0...Simple Moving Average or Moving Average(SMA,MA).In

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simplegreen Member Profile simplegreen Member Level 
Tuesday, November 13, 2007 9:53:06 PM
Re: None Post # of 118299 
CHART SCHOOL..Lesson 101.0...Simple Moving Average or Moving Average(SMA,MA).In this lesson we start from the ground up on Technical Analysis.What is a moving average?In the chart example you will find MA(20) and it is simply an average of the closing price for 20 consecutive trading days and is constructed like this.Take the closing PPS(price per share) of the last 20 days..add them together...divide by 20 and there you have MA(20).On the next day add the new days data...subtract the first in the series...divide by 20 again ..and this is the latest MA(20)..and so on.As you can see the average price "moves" with each new calculation.MA(20) is important to many traders because as you will see in the chart that the stock price rises as it finds support at the MA20 and falls as it finds resistance at MA20...See That?As PPS rises above MA20 it will occasionally "test" the MA20 and if it falls to the MA20 and "bounces" off it the stock will continue to rise.The converse is true if it finds resistance at MA20.IOW if it is below MA20 it will try to rise but hits the 20 and bounces back down.I realize that this is very elementary for many but I must build Technical Skills in traders from the bottom up to make absolutely certain that all terms and indicators are crystal clear....just like addition comes before multiplying in math..then you inderstand that muliplication is simply repetitious adding.A foundation for the future learning.Here is the chart for ALD and it has 3 technical indicators...RSI(14)..MA(20)..and MACD(12,26,9).I will get to the others in proper steps along with Exponential Moving Averages(EMA) and that is necessary to complete the teaching this chart setup will provide.Study the chart carefully to see how each indicator relates to price action and be ever mindful of the volume bars as well...this is a way a person can easily grasp their meaning and significance....chart





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