Percentage price deviation from moving average
factor.formula
BIAS:
in:
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The closing price of the current trading cycle represents the price of the last transaction in the cycle and is the basis for calculating the price deviation from the mean.
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The Simple Moving Average of Closing Price over N periods represents the arithmetic mean of the closing prices over the past N periods, which is used to smooth price fluctuations and form a baseline reference line.
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The length of the cycle of the simple moving average is usually calculated using short-term, medium-term and long-term parameters, such as 6, 12, 20, 24, 60, etc. The choice of N value affects the smoothness of the moving average and its sensitivity to price changes. Smaller N values are more sensitive to price changes, while larger N values are smoother.
factor.explanation
The price deviation percentage from the moving average (BIAS) quantifies the volatility of the price relative to its mean in the short term by calculating the percentage of deviation of the current closing price from the N-period simple moving average. A positive BIAS value indicates that the current closing price is above its moving average, suggesting that the market may be overbought and the price may face a risk of a correction. The larger the value, the more overbought the short-term price is and the greater the possibility of a reversal. A negative BIAS value indicates that the current closing price is below its moving average, suggesting that the market may be oversold and there may be a rebound opportunity for the price. The smaller the value, the more oversold the short-term price is and the greater the possibility of a reversal. This indicator is often used to assist in determining the timing of price reversals and is used in conjunction with other technical indicators to improve the accuracy of predictions. In quantitative trading, BIAS can be used as an important component of building a reversal strategy.