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Moving Average Slope

Knowledge Base ID: 10.1.1.06

 

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Tags: Indicator Analysis, MACD, Momentum, Moving Averages

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Moving Average Slope

The Moving Average Slope subtracts the moving average level n-periods ago from the current moving average level. For example, a recent magazine article referred to slope as the 80-day simple moving average of the daily closing price minus the level of the same 80-day simple moving average 10-days previous. We have tried all the many variations on this theme, and we prefer the moving average crossover because it is more effective.

Some people fool themselves by using different indicators that are, in effect, the exact equivalent of one another. For example, it is curious to note that an exponential moving average changes slope from down to up or up to down at the same time that the close crosses the exponential moving average. An n-period simple moving average changes slope from down to up or from up to down at the same time that an n-period rate of change crosses zero. An n-period weighted moving average changes slope from down to up or from up to down at the same time that the close crosses a simple moving average of length n-1 periods. Seemingly different indicators sometimes produce the same results. Watch out for multicolinearity.

Source: Colby, Robert. The Encyclopedia of Technical Market Indicators; (c) 2003.

Comments

Rajiv Vyas
8/10/09 @ 02:09 pm

Thanks from
Dr Selim Ahmed (CFTe)
Cell phone +20110163707
sasco_me@yahoo.com
info@borsaty.com
Egypt

John McGinley
11/11/09 @ 01:26 pm

However, slope can be useful because the maximum upward/downward angle of slope(1st derivative)always occurs before - or at least simultaneously - with a price top/bottom, by definition. With the exception of a spike top/bottom, with the proper(?)width, slope is never late. The only decision one must make is the width of slope measurement inasmuch as a derivative cannot be taken, sadly; a price series has no equation to apply the derivative to. Taking the slope of a MA is a fool's errand; you're smoothing a smoothing. John McGinley, CMT