Friday, February 11, 2011

Why do moving averages converge .

The chart shows the convergence of the mavs (21,55,144 )
But why do they converge ????
Because all the participants reach a conclusion , time allows them to be drawn together , to reach a balance or agreement of value.
If it is decided the value of something is $1 then at that point there is nothing to facilitate trade , in otherwords thers no imbalance everyone agrees !

This balance will occour at the center of a distribution of prices, once reached , to faciliate trade something must create an imbalance , and is usually some revevant anouncemant.
We can see in the chart how the market has completed a round trip.
From the initial breakout it has retreated 100% completing a distribution.
At some point in the future the maves will converge once again and from that point we will get a new move . Each distribution in prices has a beggining and an end, but the market moves on add on forever , continually moving from balance to imbalance ..or from effeciency to ineffeciency and back again .Or in other words the Mav convergence , is the end of one phase and the beginning of something new.

good luck.

1 comment: