Geometric moving average

The Geometric moving average calculates the geometric mean of the previous N bars of a time series. The simple moving average uses the arithmetic mean, which means that it is calculated by adding the time series' value of the N previous bars and then dividing the result with the lookback period.

1. How do you find the geometric moving average?
2. Why is geometric mean better than arithmetic?
3. What is the most accurate moving average?
4. What are three types of moving average?

How do you find the geometric moving average?

Calculating the geometric moving average

Next is to multiply all the numbers together and then raise their product to the power of the inverse of the count of the numbers in the lookback period. After that, we subtract one from the result.

Why is geometric mean better than arithmetic?

The geometric mean differs from the arithmetic average, or arithmetic mean, in how it is calculated because it takes into account the compounding that occurs from period to period. Because of this, investors usually consider the geometric mean a more accurate measure of returns than the arithmetic mean.

What is the most accurate moving average?

Often used as a directional filter (more later) 21 period: Medium-term and the most accurate moving average. Good when it comes to riding trends. 50 period: Long-term moving average and best suited for identifying the longer-term direction.

What are three types of moving average?

You will often hear about three types of moving averages: simple, exponential, and linear.