Mathematics in Trading: The 10 Formulas You Need to Know

Mathematics and trading go hand in hand, and it is a well-established fact that trading is incomplete without the use of mathematics. Mathematics helps traders to evaluate the risks and make informed decisions. The market is full of fluctuations, and mathematics provides the tools to deal with these fluctuations.

In this article, we will discuss the 10 mathematical formulas that are always used in trading. We will also provide examples of calculations and history anecdotes related to these formulas.

Moving Average (MA) Formula:

The Moving Average (MA) formula is used to analyze the average price of a security over a specific period. It is used to identify trends and momentum in the market. The formula is simple:

MA = (Sum of Closing Prices over N Periods) / N

For example, if we want to calculate the 20-day moving average of a security, we would add up the closing prices of the last 20 days and divide it by 20.

History Anecdote: