Free Economics Dissertations - 2.1 Investor Decisions Based On Moving Averages (ma). To Have A More
2.1 Investor Decisions based on Moving Averages (MA).
To have a more detailed understanding, I have made use of a chart (next page) to look at the Moving Averages in Coffee Prices - The beginning of the year showed a significant climb in the moving averages between January and mid-March and then a significant drop till the mid of April. One of the least complex ways to use a moving average is to simply look at the slope a rising slope indicates that the market is in an uptrend and falling slope indicates a downward trend in the market. Moving Averages is a statistical technique for smoothing price movement in order to identify the trends more easily. It is equally important to understand that moving averages are sensitive to the number of days used to calculate the average i.e. the more days that are used; the less sensitive is the average.
Some experts are of the view that MA can be a critical factor in decision making. For e.g. traders can make use of one or more MA to determine buy or sell decisions i.e. to use a slow MA together with a fast MA. A slow moving average can be calculated by taking more days opening or closing prices and fast moving average by taking fewer days prices. In a more elaborate way, what it means is that you must buy when the faster MA goes above the slower one and sell when the faster MA goes below the slower one [or] buy when prices are above both fast and slow MA and sell when prices are below both MA.
The chart below is a graphical example of how a Moving Average looks like as of 05/27/2005. The Red Line (price line) is above the moving average so the trend is up indicating that the market is bullish and also the fast moving average (dark blue) is above the slow moving average (light blue).
Volume of 7078.00 suggests the measure of trading activity during the selected period of time. It refers to the number of futures contract that are either bought or sold during that period. Open Interests, on the other hand, measures the number of futures contract that remains open at a particular point in time, usually at the closing of trade.
In the next chapter, I have looked at India as a producer of Coffee. India is relatively news into the coffee future markets and has performed exceedingly well. However, due to the speculative nature of the futures market and also bureaucratic hurdles have led to decrease in contract sales and increased price and non-competitiveness in the global coffee market.3.0 Coffee in the Indian Futures Markets.
The contribution of India in the world coffee market globally is minimal. India accounts for just 4 percent of the world’s total coffee production. The two principal species of coffee grown in India are Robusta and Arabica.
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