Typical Price

The typical price is a simple average of a security’s high, low, and closing prices for a given period, used in technical analysis to gauge market sentiment. It provides a more balanced view of a security’s price than just the closing price. The typical price is often used as a basis for calculating various technical indicators, such as the Commodity Channel Index (CCI) and the Money Flow Index (MFI).

Example

To calculate the typical price for a stock with a high of $100, a low of $90, and a close of $95, the formula is ($100 + $90 + $95) / 3 = $95.

Key points

• A simple average of a security’s high, low, and closing prices for a specific period.

• Used in technical analysis as an indicator of market sentiment.

• Provides a more balanced view of price action than just the closing price.

Quick Answers to Curious Questions

Why do technical analysts use the typical price instead of just the closing price?

The typical price includes the high and low prices, providing a more balanced representation of market activity than the closing price alone.

How is the typical price calculated?

It is calculated as the average of the high, low, and closing prices for a specific period.

Which technical indicators use the typical price in their calculations?

Indicators like the Commodity Channel Index (CCI) and the Money Flow Index (MFI) often use the typical price to gauge market sentiment and trend strength.