High/Low Moving Average (HLMA)

This study allows you to quickly and easily compute a simple moving average of the high and low for the interval. The length of the moving average may vary for the high and low. For example, some traders use this study as a measure of the market's support and resistance areas. Simply, at what price level do buyers enter the market and support prices, or at what price level do sellers take profits and pressure the market lower. The moving average of the high could be the resistance area, while the moving average of the low is the support area.

Like any moving average system, you can vary the rules of the trading system. Some traders prefer to buy or sell breakouts above or below the resistance and support areas, respectively. Others, tend to use the resistance and support areas as zones to establish a market position in the direction of the dominant market trend.

Generally, the high/low moving average is not a crossover system. Rather, it creates a channel about the bars on the price chart. In a market with a strong trend, prices may trade beyond the channel, either above or below. A trader could use the escape from the channel as a strong reason to establish a complementary market position.

FutureSource allows you to specify the length of the interval for both the high and low. The lengths do not have to be equal in length. For example, you might use ten intervals for the high and only eight intervals for the low.

Parameters:

• HighPeriod (10) - the number of bars, or interval, used to calculate the Moving Average for the high.
• LowPeriod (8) - the number of bars, or interval, used to calculate the Moving Average for the low.

Computation

The computational procedure for a moving average is the same as calculating a simple arithmetic average. The formula is as follows:

MAHt = (H1 +... + Hn) / n

• MAHt is the moving average of the high for the current period.
• Hn is the high for the nth interval.
• n is the length of the moving average for the high.

MALt = (L1 +... + Ln) / n

• Malt is the moving average of the low for the current period.
• Ln is the low for the nth interval.
• n is the length of the moving average for the low.

It can be quite tedious to repeat the above calculations several hundred times for just one moving average on a price chart. That is why you have FutureSource.