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The Typical Price Moving Average combines the Pivot Point concept and the Simple Moving Average. The Pivot Point (see: Pivot Points) calculation is shown below:
- Pivot Point = (High + Low + Close) / 3
The calculated Pivot Point number is then inputed into the regular Simple Moving Average (see: Simple Moving Average) equation; rather than the input of the closing price, the Pivot Point calculation is used.
The chart below of the mini-Dow Jones Industrial Average Futures contract shows the slight difference between a 10-day Simple Moving Average and a 10-day Typical Price Moving Average:
The Typical Price attempts to give a more real representation of where price has been by incorporating the high and low price into the most often used closing price. The Typical Price is consequently seen as a more pure Simple Moving Average; nevertheless, as can be referenced by the chart above of the mini-Dow Future, there is not much difference between either Moving Average.
Potential buy and sell signals for the Typical Price Moving Average indicator are discussed on the Simple Moving Average indicator pages (see: Simple Moving Average).
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