Lecture 8: Technical Analysis - Moving averages Flashcards Preview

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Flashcards in Lecture 8: Technical Analysis - Moving averages Deck (8)
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1
Q

A ?? is the average price of a security over a set amount of time.

A

A moving average is the average price of a security over a set amount of time.

2
Q

? Moving Averages (SMA):

  • the most common method used to calculate the moving average of prices.
  • It simply takes the ? of all of the past ? prices over the time period and divides the result by the number of prices used in the calculation.
A

Simple Moving Averages (SMA):

  • the most common method used to calculate the moving average of prices.
  • It simply takes the sum of all of the past closing prices over the time period and divides the result by the number of prices used in the calculation.
3
Q

The shorter the period used to calculate SMA, the ? variation and the ? it fits with the actual price movement.

A

The shorter the period used to calculate SMA, the greater variation and the better it fits with the actual price movement.

4
Q

If actual price data cuts and moves below SMA, it’s a signal to ?.
If actual price cuts from below and move up SMA, it’s a signal to ?.
However, because price has already fallen/risen, this is a ‘?’ signal.

A

If actual price data cuts and moves below MA, it’s a signal to sell.
If actual price cuts from below and move up MA, it’s a signal to buy.
However, because price has already fallen/risen, this is a ‘lagged’ signal.

5
Q

The longer the period used to calculate SMA, the ? the lag between actual and SMA.

A

The longer the period used to calculate MA, the bigger the lag between actual and MA.

6
Q

‘Crossover’:
If the short-run MA cuts the long-run MA from below => ? signal.
If the short-run MA cuts the long-run MA from above => ? signal.

A

‘Crossover’:
If the short-run MA cuts the long-run MA from below => buying signal.
If the short-run MA cuts the long-run MA from above => selling signal.

7
Q

’?’: when short-run MA cuts long-run MA and quickly reverse after a short period of time
=> if we follow the buy/sell signal of whipsaw, => ?transaction costs.

A

‘Whipsaw’: when short-run MA cuts long-run MA and quickly reverse after a short period of time
=> if we follow the buy/sell signal of whipsaw, => high transaction costs.

8
Q

Empirical evidence suggests that Technical analysis is usually used in the ?-run to generate buy/sell signal.

A

Empirical evidence suggests that Technical analysis is usually used in the short-run to generate buy/sell signal.