What is the calculation for moving average deviation based on?

• A. The last price of a security and its thirty-day average
• B. The last price of a security and its ten-week moving average
• C. The last price of a security and its year-to-date average
• D. The last price of a security and industry benchmark

Answer: (B)

Moving average deviation is calculated based on the current price of a security in relation to its moving average over a specified period. In this case, the calculation involves comparing the last price of the security to its ten-week moving average. This approach helps traders identify trends and potential reversals by indicating how far the current price is from its average price over that time frame.

Using a ten-week moving average provides a balanced view of medium-term price trends, which can be especially useful in day trading to assess momentum and volatility. The focus on a specific moving average period allows traders to set targets or make decisions based on statistical analysis of how the price behaves relative to this average.

The other options involve different time frames or comparisons that may not align with traditional day trading practice. For instance, a thirty-day average or a year-to-date average introduces much longer periods, which may dilute the relevance for short-term trades typically associated with day trading. Additionally, comparing the last price to an industry benchmark may provide a comparative context but does not directly address the calculation of moving average deviation, which centers on the relationship between the current price and its moving average.