Moving Average

A moving average is an indicator that shows the average value of an issue over a specific time period. For example, a six period moving average would take the sum value (often the closing price of the bar) over six days, compute the sum, and divide by six. The longer the length of the moving average, the slower it reacts to the market and, conversely, the shorter the moving average, the more sensitive the moving average will be to a price change.

Some ways moving averages can be used are to “smooth-out” price fluctuations and help emphasis the direction of a trend, if even a minor trend. For example, if a price is above a moving average, speculators and investors tend to buy; if a price is below a moving average, speculators and investors tend to sell.

Moving averages can be displaced, or offset, by a given number of bars – this is called a displaced moving average, or DMA. It is frequently meaningful when the current price crosses the DMA.

For Advanced GET Users:

The “6/4 Moving Average” is the same thing as the “6/4 DMA Channeling” technique, which is referred to in the Advanced GET manual, seminar video tapes, and demo disk. It combines two moving averages, which have slight variations, and says that trend reversal is not complete unless both the moving averages are crossed.

The “6/4 Moving Average Cross Up” scan helps identify those issues that are higher probability candidates for a trend reversal. The 6/4 DMA Channeling technique should be used with a Type 1 or 2 Buy or Sell setup to help confirm that trend reversal. A “6/4 Moving Average Crossing Up” scan is also useful in identifying early Type 1 and 2 Buy signal setups.

To manually create a “6/4 Moving Average” in the Advanced GET program, go to the Moving Average menu, and create two moving averages. Both moving averages will have a “Length” set to “6” and the “Offset” set to “4.”  The difference between the two moving averages will be to set one moving average “Source” to “High” and change the color to “Blue;” the other set the “Source” to “Low” and make “Red” the color.