Saturday, December 8, 2007

Simple and Exponential Moving Average

Moving averages are lagging indicators,will give always late signals.
By weighing recent price data more heavily, exponential moving averages speed up the signal.

No matter which average you use,Simple and exponential moving averages will give similar signal. So,its best for you to choose whichever type of average you are most comfortable with it.

important :
1.An upward moving average is more bullish than that is moving sideways.
A downward moving average is more bearish than that is moving sideways.

2.Its bullish,when the price is above an upward moving average.
its bearish,when price is below a downward moving average.

3.If you are using more than one moving average on a chart, then it is bullish if the shorter moving average is above the longer one and the share price is above both moving averages. It is bearish when share price is below moving averages.

4.A 4-day moving average with a 9-day will be very similar to a 5-day with a 10-day.

5. to analyze the chart in the short,medium and Long term,Moving Averages should be 5 and 10-day for short term,30 and 50-day for medium,100,200-day for long term.

Sunday, December 2, 2007

Money Flow Index

Money Flow Index or Smart Money Flow Index
The purpose of using MFI is to detect accumulation and distribution.

MFI is a more rigid indicator because it is volume-weighted, and is therefore a good measure of the strength of money flowing in and out of a security.

It compares "positive money flow" to "negative money flow" to create an indicator that can be compared to price in order to identify the strength or weakness of a trend. Like the RSI, the MFI is measured on a 0 - 100 scale and is often calculated using a 14 day period.

The extreme readings do not always result in major tops and bottoms.

Typical Price = ( (Day High + Day Low + Day Close) / 3)
Money Flow = (Typical Price) x (Volume)

The MFI compares the ratio of "positive" money flow and "negative" money flow. If typical price today is greater than yesterday, it is considered positive money. For a 14-day average, the sum of all positive money for those 14 days is the positive money flow. The MFI is based on the ratio of positive/negative money flow (Money Ratio).

Money Ratio = (Positive Money Flow / Negative Money Flow)
Money Flow Index = 100 - (100 / (1 + Money Ratio))

To Calculate Money Flow Index in MS Excel:.

Column values to enter formulas U have to enter

A = Company Name/date
B = Open
C = High
D = Low
E = LTP/close
F = Volumes

G = Typical Price = (Day High + Day Low + Day Close)/3 So formula =(C2+D2+E2)/3
H = Money Flow = (Typical Price) x (Volume) So formula =G2*F2
I = Positive Money Flow,So formula =IF(G2 greater than G1,H2,0)
J = Negative money flow,So formula =IF(G2 less than G1,H2,0)
K = Average Positive Money Flow(14days) So formula =SUM(I2:I15)
L = Average Negative Money Flow(14days) So formula =SUM(J2:J15)
M = Money Ratio = (Po.Money Flow/Neg.Money Flow) So formula =K15/L15
N = Money Flow Index = 100 - (100 / (1 + Money Ratio)) So formula =100-(100/(1+M15))

Pls note: replace "greater than" with symbol ">" and"less than" with symbol "<".if used any where.