I have a question about calculating Moving averages. I'm curious to know how a 20 period 60 minute moving average is calculated? The reason I ask is because I have this software which does this, but not in the traditional manor it seems. It simply does not plot a 60 minute chart with a 20 period Moving average. The line mostly ressembles a 75MA on a 10 minute chart. I'm wondering if anyone heard of such calculations in trading?
Most moving averages are calculated using the closing price for each period, but most trading software should allow you to specify the price to use for the calculation. I use quotetracker, and you specify the price to use. The options are: close; open; high; low; average of high and low, average of high, low and close; average of open, high, low and close; average of open and close.
Yes I figured that much. That it calculates the average for the certain periods. But I guess the software I use, utilizes some other calculation. I view a 2-min chart, and on that same chart I can plot a MA by choosing the TIME and PERIOD. So on a 2-min chart i choose to plot a 20 period 60-minute MA. Yet when I try to view a 60 min chart and plot a 20 period MA on it, the price does not match.
If you can look under the hood (i.e. at what data points you are averaging), just run the average for each 20 samples of x60 (60 minute sampled data point) and verify if it equates to what they display/calculate. As prior poster suggested, that x60 data point might be o,h,l,cl or some average of that range; you need to verify how it is derived. If you are using an hourly chart frame, and sampling minute intervals, then the displayed average might not make much sense. Why not try to up the sample rate to hourly and see if it makes more sense?
I'm charting on a 2 minute time frame. But the parameters for the MA are 60 minutes, 20 periods. Quite strange because once I chart off a 60 minute, the MA line does not match up
show a screen capture and some data. You are making a faulty assumption somewhere. Be careful about how and what it is sampling with exactness. A 60 min sample on a 2min chart (which I assume means samples every 60 minutes), should only show a MA data pt every 30 2 min bars (rest would be interpolated in some manner). The same sample set on a 60min or 1hr chart would show a MA data point for every single bar displayed. Is that the case?
Interesting that's what your MAs are .... I was told to use a 20, 50, 200 SMA ... because those are the ones most commonly used by traders, and they have a greater likelihood of becoming a self-fulfilling prophecy. they have not failed me yet. thoughts???
60-minutes on a 2-minute chart is a factor of 30. Try to plot a 30 period MA. If they match, then the problem is with the period.