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Data Source and Methodology
All calculations are based on standard formulas used in technical analysis of stock markets.
The Formula Explained
SMA: \( \text{SMA} = \frac{\sum \text{Data Points}}{\text{Number of Data Points}} \)
EMA: \( \text{EMA} = \left(\text{Current Price} - \text{Previous EMA}\right) \times \text{Multiplier} + \text{Previous EMA} \)
Glossary of Terms
- SMA: The average price over a specific time period.
- EMA: A type of moving average that places a greater weight and significance on the most recent data points.
Practical Example
For data points 10, 20, 30, 40 and period 3, the SMA is calculated as (10+20+30)/3 = 20.
Frequently Asked Questions (FAQ)
What is a Moving Average?
A Moving Average is a widely used indicator in technical analysis that helps smooth out price action by filtering out the noise from random price fluctuations.
How is the SMA different from the EMA?
The SMA is an average of data points over a period, while the EMA gives more weight to recent data, making it more responsive to new information.
Why use Moving Averages?
Moving Averages are used to identify the direction of the trend and to determine support and resistance levels.