Technical analysis II

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4. Where to plot moving averages

We've seen how a moving average is calculated. But where, on the x (time) axis, do you actually plot the average that you've calculated?

Below are the figures that we used before to calculate a 7-day moving average of 276. Arguably, you could plot that 276 against any of the days. It's got to be one of them and it can't be all of them.

In practice, technical analysts tend to plot moving averages against the final day in the sequence - in this case Day 7 - to create a chart of 'lagging' moving averages.

The reason is it known as lagging is that the peaks and troughs in the moving average data lag the same features in the actual price data.

Glaxo Welcome share prices with a 20 day moving average

Click here for the full size graph.

1. Average share prices 2. Moving averages 3. Weighted moving averages 4. Where to plot moving averages 5. Interpreting moving averages - the basics 6. Classic interpretation of moving averages 7. Combining short and long term moving averages 8. Moving average convergence/divergence (MACD) 9. Reversal patterns 10. Head and shoulders top 11. Head and shoulders bottom 12. Double top 13. Double bottom 14. Rounding tops and bottoms 15. Broadening formations 16. Wedge formations 17. The momentum indicator 18. The momentum oscillator 19. Rate of change indicator 20. Price minus average 21. Relative strength indicator 22. Conclusion

• Martin Pring's Introduction to Technical Analysis
• Technical Analysis Plain and Simple
• Technical Analysis of the Financial Markets
• An Introduction to Technical Analysis - Reuters Financial Training Series