"With respect to your 200 days moving average, do you use the SMA ( simple MA) or EMA (exponential MA) ? Which one of the two MA indicators is the most realistic? Thank you and best regards"

Eoin Treacy's view Thank you for this question which may also be of interest to other subscribers. There has been a great deal of discussion over the years about what the best moving average to use is and which calculation method to employ, but a more important question is how they should be used for analytical purposes. At Fullermoney we describe moving averages as trend smoothing devices that lag by definition and use the 200-day moving average as representative of the mean for a year's trading.

We tend to use the MA to illustrate how overextended relative to the mean a market has become, to indicate an approximate level to which a reversion might occur or around what level support may be found. Because we are only using the MA as an approximate indication of the where the mean might be rather than as a sacrosanct level, the method of calculation is secondary concern.

Personally, I tend to favour the exponential moving average because it gives more weighting to the most recent data. Whenever I post a chart in Comment of the Day with a moving average it will be an exponential moving average.