I want to calculate the Simple Moving Average (SMA) for Stock Prices with for period 'N'.

Normal Formula for 4 Period Moving Average is

MA = (a + b + c + d) / 4

for new entry e we do as following:

MA(new) = (b + c + d + e) / 4

Problem here is that I need to store for the N period's prices. I have tried for multiple things like

New Average = {(Old_Average x N) + (New_Data_Point - Old_Average)}/N

but I am loosing on precision.

The sole aim is to reduce the dependency on previous period array values. Can anyone please help. Thanks in advance.


This is impossible. You need to remember the tail.

I'd suggest using exponential smoothing in this case. Otherwise, for a simple moving average you'd have to apply some kind of an approximation. There's no point in doing so in my opinion.

  • $\begingroup$ You can easily store the tail in, for example, a circular buffer en.wikipedia.org/wiki/Circular_buffer . It is very easy to program. $\endgroup$ – Alex C Apr 29 '17 at 20:39
  • $\begingroup$ @AlexC Hi Alex, the reason behind not maintaining the tail is that the trading strategy is a positional one and not an intraday. And the system doesn't allows multiple values from a previous day to be carried for the next day (due to some system shortcomings). Hence if I am checking if carrying just a Single last SMA value of day 1 to the day 2 is enough or not! $\endgroup$ – Akshay Apr 30 '17 at 16:57

Have you tried a moving average utilising exponential-decays? It is calculated via an updating rule as you desire, I guess the downside is that it isn't of finite 'memory' like the moving averages that you mention.

It would be defined as x(t) = x(t-1)*L + (1-L)*y(t) where x(t) is the value of the moving average, y(t) is the new value of the series you are calculating the moving average of and 0 < L < 1 is a fixed parameter that control the 'length' of the moving average window (as L moves down from 1 to 0, the window reduces in length)


You need the tail for precision, but you can estimate as follows:

The mean, $\mu$, as set of integers $[X_i, X_{i+1},\ldots, X_N ]$ is defined thus:

$\Large{\mu_{X} = \frac{\sum_n^N X_i}{N}}$

To estimate the mean at $n$, you could simply do the following:

$\Large{\mu_{X,n} \approx \frac{1}{N}X_n + \frac{N-1}{N}\mu_{X,n-1} }$

See the following thread for a related question on using exponential weighting: Is there a non-recursive way of calculating the exponential moving average?

  • $\begingroup$ Thanks for the way out. I'll try out something of this sort! $\endgroup$ – Akshay Apr 30 '17 at 16:55

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