Charting and Studies User Guide - CQG.com

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unable to track an extended one. Placing a Moving Average on the Parabolic will ride the trend
for longer and maintain more sensitivity than simply using a longer period Moving Average. This
concept can be reversed, so a Parabolic is placed on the Moving Average to obtain the same
effect.
Traders will often use multiple MAs of different lengths or calculation methodologies and watch
for crossover points. The relationship between two MAs may be measured using the Oscillator
and MACD studies.
The MA is often considered a support or resistance point.
The MA envelopes are generally used to identify overbought (OB) and oversold (OS) conditions.
As with other indicators which provide OB/OS conditions, these may be used to either identify a
breakout or an extreme point that may be traded against.
Traders generally consider price activity within the bands to be neutral in nature.
Simple Moving Average Calculation
For the following example the PERIOD = 3.
The first value for a Simple Average is determined by formula SIMPLE. It is plotted on the chart
at the third bar from the left side of the screen.
SIMPLE = (PRICE 1 + PRICE 2 + PRICE 3) / PERIOD
The next value would be plotted at the fourth bar from the left side of the screen.
SIMPLE = (PRICE 2 + PRICE 3 + PRICE 4)/PERIOD
Subsequent values would be determined by eliminating the oldest PRICE from the calculation,
and including the next more recent PRICE.
Centered Moving Average Calculation
A Centered Average is calculated the same as a Simple Average. The difference is where the
first point is plotted. A Centered Average plots the first point at the center bar of the specified
PERIOD.
For example: The first point for a 3 PERIOD Centered Average would be plotted at the 2nd Bar,
where the first point for a 3 PERIOD Simple or Smoothed average would be plotted at the 3rd
Bar.
In the case of a Centered Average with an even number of PERIODs, the first point would be
plotted at the bar immediately to the right of the center bar.
Smoothed Moving Average Calculation
A Smoothed Moving Average is similar to a simple moving average. However, in a smoothed
moving average, rather than subtracting the oldest value, as in a simple moving average, the
previous smoothed average value is subtracted.
For the following example the PERIOD = 3.
First value is ready when Period first bars are accumulated.
Charting and Studies User Guide