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An End-Point Moving Average is based on linear regression analysis. A regression line is a statistical concept (see the November 30, 1995 DollarLink newsletter). It is a straight line between a series of data points such that the sum of deviations of all data points from the line is the minimum. In technical analysis, the regression line typically represents a trend line that incorporates the effect of all price data. It is an effective tool because prices will tend to oscillate about the regression line. DollarLink allows you to draw regression lines and standard deviation channels above/below by pressing DDR (Data, Draw, Regression).
An EPMA is similar to an arithmetic moving average in the sense that it needs a set of datapoints (as opposed to an exponential MA which requires only the value of the current exponential MA and the new price value).
Similar to the procedure for an arithmetic moving average, DollarLink calculates the definition of a regression line for a set of data. Then it computes the value of the last (rightmost) point by using the equation of the line. That becomes the first value of the EPMA. Then DollarLink repeats the procedure for the set of data shifted to the right by one datapoint. It continues in this fashion until it goes through all the data in the chart.
An EPMA is more sensitive than an arithmetic or exponential moving average. If you are using moving averages as part of your trading decision-making, take note that EPMA appears to generate better buy/sell signals than arithmetic or exponential moving averages.
One simple, but effective, set of rules: go long when the price chart itself goes above (from below) the EPMA and the EPMA is moving up, and go short when the EPMA is moving down and the price goes below (from above) the EPMA. You can use the same parameters as for an arithmetic moving average.
For bar charts, an EPMA can be based on opens, highs, lows, or closes of a bar. For intraday line charts, an EPMA is based on price data in a user-set number of minutes.
Similar in its treatment of arithmetic moving averages, DollarLink allows you to plot up to 3 EPMAs on the same chart. EPMAs can also be dynamic, i.e. update automatically with incoming price quotes.
Due to the high computational effort involved, you should use this EPMA study only with a powerful PC (66 MHz 486 or faster).
Not only can we promptly answer questions our customers may have about DollarLink, but most of the time we can send our customers the latest updates of DollarLink itself by E-mail. Thus, instead of waiting several days, a customer may get his update the very day he requests it.
If you have an E-mail address, please let us know by E-mailing it to us. Our E-mail addresses are dollarwin@aol.com (on America On Line) or dollar@creative.net (on the Internet). You can use either one to send us E-mail. We usually check the dollar@creative.net address more often.
If you are planning to join the Internet world but are confused by all the choices, we suggest America On Line (AOL). Their software is usually the smoothest to install and use. In addition to E-mail, AOL has a lot of informational depth and, of course, it has easy access to the Internet.
Later on, if you really get hooked on the Internet, then you should get a flat-fee account with an Internet Service Provider. (We don't suggest this type of an account for beginners because it is more difficult to set up and use.)
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