Moving Averages

Question 1

Variable EMAs

Answer 1

• Are adjusted in function of the volatility
• MAMA, FAMA, KAMA, MESA

Question 2

Wilde’s method

Answer 2

• MA_{day i} = ((n - 1) x MA_{i - 1} + Price_{day i}) / n
• Should be used in the calculation of ATR, RSI and DMI

Question 3

Wilder’s Directional Movement

Answer 3

• UpMove = today’s high − yesterday’s high
• DownMove = yesterday’s low − today’s low
• if UpMove > DownMove and UpMove > 0, then +DM = UpMove, else +DM = 0
• if DownMove > UpMove and DownMove > 0, then −DM = DownMove, else −DM = 0

Question 4

Using ADX with a MA crossover

Answer 4

The ADX will determine if prices are trending at a rate at which a moving-average crossover system will work

Question 5

Deviation from trend method

Answer 5

Use a Close/ 10-day SMA ratio to determine the deviation from a trend

Question 6

MA Envelopes

Answer 6

Signals occur when the envelope, rather than the longer MA, is crossed by the signal line

Question 7

Keltner Band

Answer 7

• Middle Line: 20-day exponential moving average
• Upper Channel Line: 20-day EMA + (2 x ATR(10))
• Lower Channel Line: 20-day EMA - (2 x ATR(10))

Question 8

Bollinger Band

Answer 8

• Middle Band = 20-day simple moving average (SMA)
• Upper Band = 20-day SMA + (20-day standard deviation of price x 2)
• Lower Band = 20-day SMA - (20-day standard deviation of price x 2)

Question 9

Signals with bands

Answer 9

Occur when the price is crossing either band