Mov Avg Displaced

Last modified 13:27, 5 Nov 2012

Mov Avg - Displaced

Mov Avg - Displaced is a simple moving average with the ability to be adjusted to account for distortions caused by the averaging.

When smaller Periods are used to calculate the moving average, the plotted line will become more sensitive to price changes activating false signals of trend changes. In these circumstances the Mov Avg - Simple line is subjected to more noise and will return more false signals from short term random price movements.

One way of compensating for this is to move the display of the moving average line a number of intervals into the future. In some instances this will result in only the more important changes being identified..

In the example below the 5 interval Mov Avg - Displaced line (purple) has been set to be displayed (displaced) 5 interval in front of where it would have been plotted if it were a 5 interval Mov Avg - Simple line (turquoise):

movavdisplacdlines.gif

Displacing the line 5 intervals into the future removes it from contact with the price charts and allows more definite trend changes to be identified.

Centering

The averaging over the number of periods causes the data plotted in the moving average line to lag behind the actual price data for the current interval.

In order to approximate a statistically correct simple moving average, the plot can be centered in the middle of the time period it covers. For example, a the plot of a 20 day average would be more statically correct if the whole plot is shifted back 10 days so its center is plotted on the interval for which the entire range is calculated.

To center the displaced moving average, enter a negative number, one half the value of the Periods number, in the Day Offset parameter text box, see below.

A problem with centering is that the lag has merely been shifted, and the trend change signals will be correspondingly later, limiting their usefulness. For this reason the centering technique is used mostly by cyclic analysts to isolate underlying, longer term market cycles.

Alternative Methods of Compensating for Averaging

Displacing the display is only one of the methods developed to address the problems caused by averaging.

Instead of moving the display relative to the price chart, exponential moving averages (Mov Avg - Exponential) and weighted moving averages (Mov Avg - Weighted) alter the averaging calculation itself to give greater importance to more recent data and less to the older data.

User Settings

The user can alter three inputs (Period, Data Field and Day Offset) as well as control the visual display of the line from the  Mov Avg -

Displaced Properties dialog box.

Period for Averaging

The user can set the number of previous intervals that will be averaged with the current interval to produce the simple moving average for a given interval.

Type a whole number in the Periods text box in the Parameters tab of the Mov Avg - Displaced Properties dialog box.

Data Field

Most traders prefer to calculate the weighted average using the Close data field. This is the default setting. However it is possible to choose other data fields from the drop-down list, the choices include: Open, High, Low, Close, Bid, Ask, Volume and Open Interest.

Day Offset

Enter a positive number to offset the moving average into the future in order to remove or reduce "noise".

Enter a negative number to "center" the moving average and give a more statistically correct plot.

Display

The displaced moving average plot is a line superimposed over the price chart.

The exact display of the plot is controlled on the Plots tabbed page of the Mov Avg - Displaced Properties dialog box.

The Style selected for the line plot can be one of the following: Solid, Dashes, Dots, and Points.

Once the style is selected, each lines Color and Weighting are also controlled from this page.

The Scale's display is controlled from the Scale Settings and Scale Appearance tabbed pages.

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