Trading Techniques  |  FEB 2001

Buff Up Your Moving Average by Buff Dormeier

Moving Averages On Steroids Buff Up Your Moving Averages by Buff Dormeier Want better results? Combine your moving averages with volume and see what happens. Why should technicians only consider open/high/low/close numbers and time in forming price averages? The averages I use enhance performance by modifying the simple moving average with volume information. Volume represents the number of participants willing to wager at various points of price and time. My price averages measure the commitment expressed through a close, weighted by that day’s volume compared to the total volume during the period of the average. (See sidebar “Buff averages” on page 50 for the calculation.) Weighting the price average gives greater emphasis to those days with greater volume and less emphasis to those days with lighter volume. By enhancing the performance of your moving averages with volume, you can increase responsiveness and reliability.

by Buff Dormeier