Stock indicators. Checking the triggering of the Moving Avarage indicator on Sberbank stocks.
Do stock indicators work? We begin a series of posts on the search for the truth.
Technical analysis of stocks is based incl. on the indicators. We look at indicators, evaluate and react when making a decision to enter or exit a position.
Let's analyze the Sberbank shares, the time frame is a day, the analysis will be carried out for the third quarter of 2020.
Theory. Moving Avarage
Moving averages are of various types: simple (Simple Moving Average - SMA), exponential (Exponential Moving Average - EMA), their derivatives. All of them are lagging indicators and have one purpose - to determine the current trend of financial assets by smoothing out fluctuations and noise.
The moving average is the result of averaging the security price over the selected period (N). Multiple moving averages can be plotted by adjusting the number of time periods used in the calculation.
The simple moving average is extremely popular with traders, but like all technical indicators, it has its drawbacks. Many argue that the usefulness of SMA is limited because every point in a data series has the same weight, no matter where it occurs in the sequence.
It is believed that the latest data is more significant for the valuation of an asset than older data and should have a greater impact on the bottom line. Thus, to give more weight to the new data, an exponential moving average (EMA) was created.
Source BCS Express
Initial data. There are two indicators installed on the chart: Moving Average EMA with secret period and Moving Average EMA with secret period.
The share price at the beginning of the period 01.06.2020 203.10 rubles. Share price at the end of the period 08/31/2020 226.10 rubles. The change in value was + 11.35%, totaling 91 days or 63 trading days. We will evaluate a lot of 1000 shares.
But at the beginning of the period, we do not know our positions because the indicator worked outside the considered period.
But that's not the point. It is important for us to evaluate the work of the Moving Average indicator in the current period.
During this period, the indicator gave a signal three times. Two times for sale. One time per purchase.
1. First trigger: date 06/25/2020, sell signal, stock price at the end of the day 206.92. We open a short position of 1000 shares, worth 209.92 rubles. Total cost of the position is 209,920 rubles.
2. Second trigger: date 07/02/2020, buy signal, stock price at the end of the day 209.60. Close the short position and open a long position. The total cost of the position is 209600 rubles. Over the past period, we received a loss of 209600-209920 = 320 rubles.
3. Third trigger: date 08/26/2020, sell signal, stock price at the end of the day 227.80. Close the long position and open the short position. The total cost of the position is 227800 rubles. During this period, we received an income of 227800-20960- = 18200 rubles.
For the third quarter of 2020, direct following the indicator triggering allowed us to earn 18,200-320 = 17,880 rubles. or 8.517% of the value of the original lot 209,920 rubles.
Let me remind you that the change in the share price for the period was 11.37%. The indicator did not show the speed of response, but it reflected the trend we needed so much.
Whether or not to follow the indicator signals is up to you. But it is essential to have it in your arsenal.
We publish information about the triggering of indicators in our daily stock analysis every day.
Good luck to all! And be in trend!