Reducing Moving Average Lag with Predicted Future Prices

Summary

The document proposes modifying a 20-day simple moving average by replacing several of its oldest observations with predicted prices for the next few days. The resulting calculation combines recent historical prices, the current price, and forecast values while keeping the window length fixed. The aim is to make the indicator respond sooner to expected price changes.

This is presented as a proof of concept, and the author asks whether the modified indicator would be less lagging and more useful. No answer, experiment, or performance evidence is included. The proposal therefore raises a useful distinction: inserting forecasts can make an indicator forward-looking, but its behavior and usefulness depend on the forecast inputs and would need evaluation. It is not an ordinary historical moving average, and the document does not establish that the change improves trading decisions.

Key ideas

• The proposal replaces older observations in a 20-day average with predicted future prices.
• The modified average combines historical, current, and forecast prices while retaining a fixed window size.
• Using future estimates makes the indicator forward-looking rather than purely historical.
• The document provides no test showing that the change reduces lag or improves trading usefulness.

Tags

# Can I make the simple moving average less lagging by this method?


# Can I make the simple moving average less lagging by this method?












I have (T+3) predicted prices for a stock. Let us assume that the predicted prices are going to be very close to the actual prices. can I alter the formula of simple moving average for 20 days like this

SMA-20 for today= ((prices on 16 previous days)+ (todays price)+ (prices of T+1 to T+3)) /20

Will this make the SMA indicator less lagging and more useful to the traders

Note- This is only for proof of concept to be used in a report. Let us not debate on the accuracy of the predictions.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.