Charting and Studies User Guide - CQG.com

Page 288
Moving Average (MA)
The Moving Average (MA) study plots the average price over a user-specified period. Five
methods of calculating the Moving Average are available in CQG: Simple, Smoothed, Centered,
Weighted, and Exponential.
CQG also provides the ability to add envelopes to a MA. These lines are added to a MA when a
figure is entered under percent. The envelopes are equal to the MA times 1 plus the percent
and 1 minus the percent.
Moving averages are one of the most common forms of technical analysis because they tend to
be effective tools for identifying the trend of a market.
Many trading strategies use the MA as a filter and only go long when the MA is rising or the
price is above the MA and go short only when the MA is falling or the price is below it.
MAs tend to work best in trending markets and often lead to whipsaw type action in a sideways
trading range market. Therefore, it is important to use other filters in order to understand
trend. One method is to apply the Rate of Change to the average. A secondary method is to
move the averages forward via the offset option. This will highlight periods of congestion and
allow for a faster observation when a trend is changing. Bill Williams Profitunity Alligator study
is one that uses this concept. A final method is track momentum by placing an average on a
study, such as the Parabolic. That study is good at catching the first part of a trend, but then is
Basic Studies