Moving Averages

There are three types of moving averages that you can use in Investigator: simple, weighted, and exponential. You can have a moving average based on a bar’s open, high, low, or close. For all three calculation examples, assume a five bar average based on the bar’s close.

A **simple** moving average is calculated by adding the past four bar’s and the current bar’s close and dividing by five.

A **weighted** moving average is calculated by multiplying each bar’s close by a weight that decreases as you go further back in time. You then add these values together and divide by the sum of the weights. It is used to give current prices more importance than past prices. For example:

Bar 1’s close * 1

Bar 2’s close * 2

Bar 3’s close * 3

Bar 4’s close * 4

Bar 5’s close * 5

You would then add up these values and divide by 15 (1 + 2 + 3 + 4 + 5 = 15) .

An **exponentially smoothed** moving average is calculated by multiplying a percent of the current bar’s close to the previous bar’s moving average. The exponential percentage is defined as 2 / (the number of periods you enter + 1). The formula for the exponentially smoothed moving average is:

(today’s close * exponential percentage) + (yesterday’s moving average * (1 - exponential percentage))

**Reference: **None.