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How to calculate Simple Moving Average (SMA) 200 on a Daily Chart
There is a major discrepancy in the trading world about how to calculate the "benchmark" 200 Simple Moving Average.
One school of thought says to use adjusted historical data. StockCharts uses this type of data for calculating SMA's.
Can you please take a look at the following examples in StockCharts, just to help me understand this better.
Example 1: Use a Daily Chart set to 2 years of data on symbol HYG, and an SMA set to 200. This is the symbol version using adjusted historical data.
Example 2: Use a Daily Chart set to 2 years of data on symbol _HYG, and an SMA set to 200. This is the symbol version using unadjusted historical data.
Over the 2 year period of time on the chart, which version shows more "real world" price interaction with the 200 SMA?
Looks very clearly like the _HYG version has much more price interaction with this very important "benchmark" 200 Day Simple Moving Average as compared to the HYG symbol version.
Does this perhaps mean that more investors are using an SMA 200 calculated using unadjusted historical price data?
Just trying to get to the bottom of which version to use in the real world of trading.
One school of thought says to use adjusted historical data. StockCharts uses this type of data for calculating SMA's.
Can you please take a look at the following examples in StockCharts, just to help me understand this better.
Example 1: Use a Daily Chart set to 2 years of data on symbol HYG, and an SMA set to 200. This is the symbol version using adjusted historical data.
Example 2: Use a Daily Chart set to 2 years of data on symbol _HYG, and an SMA set to 200. This is the symbol version using unadjusted historical data.
Over the 2 year period of time on the chart, which version shows more "real world" price interaction with the 200 SMA?
Looks very clearly like the _HYG version has much more price interaction with this very important "benchmark" 200 Day Simple Moving Average as compared to the HYG symbol version.
Does this perhaps mean that more investors are using an SMA 200 calculated using unadjusted historical price data?
Just trying to get to the bottom of which version to use in the real world of trading.
0
Comments
If you are a long term investor using the dips below to sell longs, the non- adjusted MAs would have given you several reasons to sell unnecessarily in a continuing bull market, whereas the adjusted MA would have you in still (if you use a close below the MA as the sell signal). So the adjusted is actually "more accurate" for the longer term investor - at least so far.