Advancing Simple Moving Average

A technique that has a lot of potential, but is not widely used, is to advance an Moving Average.

A technique that has a lot of potential, but is not widely used, is to advance an Moving Average. In the case of a 25-day Moving Average, for example, the actual plot would not be made on the 25th day, but advanced to the 28th or 30th, and so forth.

The advantage of this approach is that it delays the crossover and filters out occasional whipsaws or false signals. During the period of 1919 to 1933, which covered almost all kinds of market situations, the use of a simple 25-day Moving Average crossover netted 446 Dow points (slightly better than 433 points for the 30-day Moving Average and far better than the 316 and 216 for 40- and 15-day Moving Averages, respectively).

However, when the 25-day average was plotted on the 28th day, crossovers resulted in an increase of 231 points to 677. The 30-day Moving Average, when advanced 3 days, also produced superior results, with an additional gain of 204 points for a total of 637.

Although the 25-day Moving Average that advanced 3 days may not ultimately prove to be the best combination, the technique of advancing an Moving Average is dearly one that could be usefully incorporated into the technical approach. It is always difficult to know how much to advance an Moving Average. Experimentation is the answer. One possibility is to advance the average by the square root of the time span. For example, a 36-day Moving Average would be advanced by 6 days (the square root of 36 = 6).