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Questions and Answers
What is the primary function of support in financial markets?
What is the primary function of support in financial markets?
- To serve as a threshold for determining stop loss levels
- To indicate a point where buying pressure may prevent further price decline (correct)
- To identify the price level where selling is strong
- To represent the average price over specific periods
Which type of moving average gives more weight to recent prices?
Which type of moving average gives more weight to recent prices?
- Harmonic moving average
- Exponential moving average (EMA) (correct)
- Simple moving average (SMA)
- Triangular moving average
How is the weight (multiplier) 'a' for the recent price in an EMA calculated?
How is the weight (multiplier) 'a' for the recent price in an EMA calculated?
- a = 2 / (time period + 1) (correct)
- a = 1 / time period
- a = 3 / (time period + 2)
- a = time period / (time period + 1)
Which of the following is NOT a use of moving averages in technical analysis?
Which of the following is NOT a use of moving averages in technical analysis?
What is meant by a crossover in the context of moving averages?
What is meant by a crossover in the context of moving averages?
Flashcards
Support Level
Support Level
A price level where buying pressure is strong enough to prevent further price decline.
Resistance Level
Resistance Level
A price level where selling pressure is strong enough to prevent further price rise.
Simple Moving Average (SMA)
Simple Moving Average (SMA)
The average price of a security over a specific period.
Exponential Moving Average (EMA)
Exponential Moving Average (EMA)
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Moving Average Crossover
Moving Average Crossover
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Study Notes
Support and Resistance
- Support is the price level where buying is strong enough to prevent further price decline.
- Resistance is the price level where selling is strong enough to prevent further price increase.
Moving Averages
- Moving averages are fundamental tools in technical analysis.
- Types include:
- Simple Moving Average (SMA): Calculates the average price over a specific period.
- Weighted Moving Average: Assigns more weight to recent prices.
- Exponential Moving Average (EMA): Gives more weight to more recent prices than older prices.
- Triangle Moving Average: A type of moving average.
Crossover with Price
- Price crossovers happen when the price of an asset crosses a moving average.
- Moving Average Crossovers: The crossover of a price and a moving average.
- Trend identification: Identifying trends through use of crossovers.
- Support identification: Identifying support levels where price is likely to find resistance.
- Resistance identification: Identifying resistance levels where price is likely to find support.
- Stop Loss/Take Profit identification: Determining when to apply stop loss/take profit based on the crossovers.
Multiple Averages Crossovers
- Multiple moving averages can be used to identify more complex crossover patterns.
Support Identification
- Support level is where price is unable to fall below.
Resistance Identification
- Resistance is the level where a price is unable to move above.
Ribbon
- Upward cross signals: The beginning of an uptrend.
- Downward cross signals: The beginning of a downtrend
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