This thread is more to jot down my ideas and put them in order, i do encourage open discussion on the matter. I have done a thread on the use of technical tools, however this one is a bit different, if anyone decides to pitch in, just know that any technical tool that you bring up, you need to know the PURPOSE behind the invention, what is really calculating and how is this helpful on the analysis of the market.

the power of the moving average:

first of all lets begin by stating what is an average, and why it is important to understand the mean of a statistical data. In my opinion the best moving average to use is the Simple Moving Average, as the other averages are created upon the intent of price prediction WMA, EMA, SMMA.... and so forth.

why do i say this? if you go on line the SMA is considered to be a lagging indicator, and its uses are regurgitated again and again, as dynamic support ad resistance, or moving average cross over price prediction in trending markets correct? they indicate to use a 50sma and a 200 sma as many traders use them and therefore you see the same thing. so the WMA,SMMA,EMAs were created to smooth or weight the average as to be affected by current price quicker and not be as slow as a SMA.

My personal opinion is that this train of thought is simply rubbish, the SMA is simply as statistical Average, and was intended to as a way to find the mathematical mean. might be common sense to many experienced traders, however i took looking at quotes move in order to grasp the idea, of charts and correct uses of technical tools. for every newbie before you look at your high tech gadget filled platform begin trading from simply the quotes and start brain storming on how to make sense of the seemingly random movement, this exercise will save you years in the learning curve.

back to my original thought: on sample pool we have many variable data, the dispersion may be concentrated on a central point or evenly distributed, but to get a sense of what is a fair value or an assumed normal point we try to find the average of the sample pool. i.e

lets say these are apples, and if you asked me how many apples are USUALLY on the table, at any given day (we have 10 numbers for 10 days)

1,1,6,8,5,5,2,2,3,7 i would tell you i dont know, anywhere from 1 to 8, but this is very brought and i'm giving you a range which is not useful if you are trying to arrive to an expected fair value.

so i say on average 4, (1+1+6+8+5+5+2+2+3+7= 40) 40/10 days = on average give and take we can expect 4 apples on a given day to be on the table, and therefore this is the fair value, if sometimes we get 1 or sometimes 8 we can assume we had LESS or MORE apples today in relationship to the mean.

what does this say as far as the market? well like all technical tools it is in no way predictive but is a way to understand what the fair market value is as to make a decision whether the currency is trading at a low or high price in relationship to the perceived mean.

same goes with the euro, if ask me what was the price of the euro this past month, i would say to you i dont know which day? which second? what do you consider month? the actual month or the trading days? do you mean open, high, low, or close prices? (you see i dont give you any useful information, maybe a very broad range= 1.3421 to 1.4246)

or i can say it was on average 1.3743 (add all closing prices and divide by 20 trading days in the month (granted is more like 21.5 trading days but mathematical exactitude is not imperative))

so give an take some pips on average it is safe to say that is fair market value, and the calculated mean.

so if you subscribe to the idea of volatility and mean reversion, or whatnot this is the first starting point in understanding whether the price today is cheap relative to the average or high viz a viz the fair market value.

however not everything is that simple, how do you know is normal volatility or its a shift in direction? that is where bollinger introduced the idea of mathematically calculate normal price variations through standard deviations from a perceived mean we call this Bollinger Bands. then there is the calculations of acceleration and momentum by speed of movement relative to a moving average.

the power of the moving average:

first of all lets begin by stating what is an average, and why it is important to understand the mean of a statistical data. In my opinion the best moving average to use is the Simple Moving Average, as the other averages are created upon the intent of price prediction WMA, EMA, SMMA.... and so forth.

why do i say this? if you go on line the SMA is considered to be a lagging indicator, and its uses are regurgitated again and again, as dynamic support ad resistance, or moving average cross over price prediction in trending markets correct? they indicate to use a 50sma and a 200 sma as many traders use them and therefore you see the same thing. so the WMA,SMMA,EMAs were created to smooth or weight the average as to be affected by current price quicker and not be as slow as a SMA.

My personal opinion is that this train of thought is simply rubbish, the SMA is simply as statistical Average, and was intended to as a way to find the mathematical mean. might be common sense to many experienced traders, however i took looking at quotes move in order to grasp the idea, of charts and correct uses of technical tools. for every newbie before you look at your high tech gadget filled platform begin trading from simply the quotes and start brain storming on how to make sense of the seemingly random movement, this exercise will save you years in the learning curve.

back to my original thought: on sample pool we have many variable data, the dispersion may be concentrated on a central point or evenly distributed, but to get a sense of what is a fair value or an assumed normal point we try to find the average of the sample pool. i.e

lets say these are apples, and if you asked me how many apples are USUALLY on the table, at any given day (we have 10 numbers for 10 days)

1,1,6,8,5,5,2,2,3,7 i would tell you i dont know, anywhere from 1 to 8, but this is very brought and i'm giving you a range which is not useful if you are trying to arrive to an expected fair value.

so i say on average 4, (1+1+6+8+5+5+2+2+3+7= 40) 40/10 days = on average give and take we can expect 4 apples on a given day to be on the table, and therefore this is the fair value, if sometimes we get 1 or sometimes 8 we can assume we had LESS or MORE apples today in relationship to the mean.

what does this say as far as the market? well like all technical tools it is in no way predictive but is a way to understand what the fair market value is as to make a decision whether the currency is trading at a low or high price in relationship to the perceived mean.

same goes with the euro, if ask me what was the price of the euro this past month, i would say to you i dont know which day? which second? what do you consider month? the actual month or the trading days? do you mean open, high, low, or close prices? (you see i dont give you any useful information, maybe a very broad range= 1.3421 to 1.4246)

or i can say it was on average 1.3743 (add all closing prices and divide by 20 trading days in the month (granted is more like 21.5 trading days but mathematical exactitude is not imperative))

so give an take some pips on average it is safe to say that is fair market value, and the calculated mean.

so if you subscribe to the idea of volatility and mean reversion, or whatnot this is the first starting point in understanding whether the price today is cheap relative to the average or high viz a viz the fair market value.

however not everything is that simple, how do you know is normal volatility or its a shift in direction? that is where bollinger introduced the idea of mathematically calculate normal price variations through standard deviations from a perceived mean we call this Bollinger Bands. then there is the calculations of acceleration and momentum by speed of movement relative to a moving average.

AVT INVENIAM VIAM AVT FACIAM