In quantitative trading, it is judged by the moving average system that the upward (downward) momentum is weakened

During the trading process, we can intuitively see the signal of momentum weakening , But if you want to build a quantitative trading system , We need to quantify this judgment method .

How to quantify the reduction of kinetic energy ？

There are many ways , Here is a simple and practical method .

The first thing you need to do is K Add two moving averages to the line chart , A simple moving average （MA）, An exponential moving average （EMA）, Set the two moving averages to the same period .

Simple moving average ： Moving average ,Moving Average, abbreviation MA,MA Yes, it is Statistical analysis Methods , The price of a security over a period of time （ Index ） To average , And connect the average of different times , Form a MA, A technical index used to observe the changing trend of securities prices .

Exponential moving average ： Exponential moving average ,Exponential Moving Average, It's based on moving average , Increase the weight of the price in a certain period closest to the current observation point , And it reduces the weight of the price which is far away from the current observation point , It makes the index moving average keep the advantage of smooth price noise , More sensitive to recent price changes .

Rising momentum weakened ： When K The line closes at MA,EMA And On when ,MA Put on EMA, Just explain Upward momentum It's weaker than before .

The downward momentum weakened ： When K The line closes at MA,EMA And Next when ,MA Under wear EMA, Just explain Downward momentum It's weaker than before .

In the figure below is EURUSD H1, MA,EMA The cycle is set to 10

In practical use, combined with the comprehensive judgment of the support resistance level, we can more accurately find the position where the kinetic energy begins to weaken .