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Moving Average

 What is the moving average?

The moving average is the average price of the stock in the last few days. The moving average is classified into two categories.

1) Simple Moving Average (SMA)

2) Exponential Moving Average (EMA)

Difference between these two moving averages. 

1) Simple Moving Average(SMA)

  • Calculation: The SMA calculates the average of a specified number of data points over a given period. It adds up the closing prices for the selected period and divides the sum by the number of data points.
  • Equal Weighting: Each data point in the selected period carries equal weight in the calculation, regardless of when it occurred.
  • Smoothing Effect: SMAs provide a smoother line compared to raw price data, helping to identify trends by eliminating short-term fluctuations.
  • Slower to React: SMAs are slower to respond to recent price changes because they give equal weight to all data points in the selected period.

2) Exponential Moving Average(EMA)

  • Calculation: The EMA assigns exponentially decreasing weights to the data points, with more recent prices carrying more significance. It uses a formula that incorporates a smoothing factor (often represented by a percentage) to give more weight to recent prices.
  • Dynamic Weighting: EMAs assign a higher weight to recent data, making them more responsive to current price movements.
  • Sensitivity to Price Changes: EMAs react more quickly to changes in the market, making them popular among short-term traders looking for timely entry and exit signals.
  • Lag Reduction: The exponential weighting formula reduces the lag compared to SMAs, allowing the EMA to closely track the price action.
  • More Suitable for Trend Identification: Due to their responsiveness, EMAs are particularly useful for identifying trend changes in real-time.
  • EMA most is used 9-day EMA, 21-day EMA, 55-day EMA, 100-day EMA, 200 days EMA.

 How moving average is helpful to buy or sell stock?

1) Trend Identification: 

Moving averages can help determine the direction of the overall trend. When the price is consistently trading above a moving average, it suggests an uptrend, while prices consistently trading below a moving average indicate a downtrend. Traders often look for stocks that are in alignment with the trend, as it increases the likelihood of successful trades.

2) Support and Resistance Levels: 

Moving averages can act as support or resistance levels. In an uptrend, the moving average (e.g., 50-day or 200-day) can act as a support level where the price may bounce off. Conversely, in a downtrend, the moving average can act as a resistance level where the price may struggle to break above. Traders can use these levels to determine entry or exit points for their trades.

3)Moving Average Crossovers:

 One popular strategy involves using two or more moving averages and observing their crossovers. For example, when a shorter-term moving average (e.g., 50-day) crosses above a longer-term moving average (e.g., 200-day), it is called a "golden cross" and is considered a bullish signal. It suggests that the stock's upward momentum is strengthening, and it may be a good time to buy. Conversely, when the shorter-term moving average crosses below the longer-term moving average, it is called a "death cross" and is considered a bearish signal, indicating a potential selling opportunity.

4) Confirmation with Price Patterns: 

Moving averages can be used in conjunction with other technical analysis tools, such as chart patterns, to confirm trade signals. For example, if a stock forms a bullish chart pattern, such as an ascending triangle, and the price breaks out above a key moving average, it can provide additional confirmation for a buy signal.



Here I can modify the exponential moving average code that works more helpful to all of us.
Before I modified the code output is this type.


After the code modifies the output is this


How can we modify the indicator in our need it is put into the given below.



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