Can anyone explain this strategy to me in simple terms, or refer me to a web page that can explain it.
Thanks.
A 10 week moving average is the average price of a stock or index (like Nasdaq or NYSE) over the last 10 weeks. Consider at the start of the year to the 10th week, this would be the average weekly closing price for the first 10 weeks of the year. The next week, the last 10 weeks would be weeks 2 through 11, then weeks 3 through 12, etc. This is a 10 week moving average.
Stocks are very volatile these days, and it’s almost meaningless what the stock price is throughout the day, or even for a whole day. But, a one week price increase or decrease is a better indicator of how a stock or index is doing relative to other stocks or indices. And, by comparing the deviations in the 10-week moving averages for a number of stocks or indices, you can get a very good indication of how strong a stock or index is over time.
December 1st, 2009 at 4:22 am
A 10 week moving average is the average price of a stock or index (like Nasdaq or NYSE) over the last 10 weeks. Consider at the start of the year to the 10th week, this would be the average weekly closing price for the first 10 weeks of the year. The next week, the last 10 weeks would be weeks 2 through 11, then weeks 3 through 12, etc. This is a 10 week moving average.
Stocks are very volatile these days, and it’s almost meaningless what the stock price is throughout the day, or even for a whole day. But, a one week price increase or decrease is a better indicator of how a stock or index is doing relative to other stocks or indices. And, by comparing the deviations in the 10-week moving averages for a number of stocks or indices, you can get a very good indication of how strong a stock or index is over time.
References :
December 1st, 2009 at 5:00 am
Basically, you would buy a stock when it rises above its 10-week moving average (this is the average of the last 10 weeks of trading) and sell when it falls below the average. In trending markets, this and any other moving average stragegies will make money. However, markets are generally trendless — trends are short-lived. In rangebound markets, this stratgy will lose money.
References :