Displacing the moving average
In order to predict the trends, the usual moving average is displaced either forward or backward in chart. It is called as "Displaced moving average” as can take the moving average and shift it by a number of intervals. It is generally used in trading strategies to seek improvement over the usual moving averages.
Let’s discuss the graphical design above:
A 14 - day SMA placed on the daily chart of Silver
A 14 - period SMA is added.
All can deduce that; the price crosses the regular moving average before crossing the displaced moving average.
What are the effects of using a displaced moving average?
Less crossover signals
More reliable signals, filtering out small trends
More lag in signals
It is important for us to understand, the impact of shifting moving averages before we can apply them in our trading strategies.
The difference between a fast-moving average and a slow-moving average
Displacing moving averages in right gives more lag and left helps in cycle analysis.