Trading options

Moving averages are considered popular indicators for day trading. Moving averages either follow trends or counter it. Moving average indicators use a combination of prices over a specific period dividing it by total data points and present all information in a trend line. Simple moving averages are among the options trading simplest and most common moving averages that are based upon an average of closing prices for the last n-period. Because it is arithmetic mean, therefore, the value of each closing price is equally weighted for calculating the Simple Mean Averages.

For example, to measure the moving average for 15-days, the sum of the last 15 closing values is divided by the number of days; here 15 days. By increasing the period to calculate, averages respond less to price changes and an increase in periods for calculations is among the best ways to determine the strength of a trend in long term and to find chances of the trend reversal in price.

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