Typical Price Study

By Samantha Baltodano

TL;DR:

The Typical Price study plots the average of the high, low, and close prices for a security alongside a SMA. As the Typical Price crosses above the SMA this may indicate an uptrend in price and vice versa.

What Is the Typical Price Study?

The Typical Price study provides a simple, single-line plot of the day’s average price. The average price is calculated as the arithmetical mean of high, low, and close price values. 

The Simple Moving Average (SMA) is also plotted alongside the Typical Price. These averages plotted together help investors identify the beginning of uptrends and downtrends for a security.

Some investors use the Typical Price rather than the closing price when creating moving average penetration systems.

The Typical Price is also a building block of the Money Flow Index.

Formula

Typical Price is calculated by adding the high, low, and closing prices together, then dividing by 3. The result is the average, or typical price.

TP = (Current High + Current Low + Current Close) / 3

Trade Signals

When the Typical Price plot goes above its SMA this might indicate an uptrend in price.

When the Typical Price falls below the SMA, a downtrend is suggested.

Summary

• The Typical Price line is an average of the high, low, and close price of a security. It’s plotted alongside a SMA.
• The formula for calculating the Typical Price plot is: TP = (Current High + Current Low + Current Close) / 3
• When the Typical Price plot goes above its SMA this might indicate an uptrend in price.
• When the Typical Price falls below the SMA, a downtrend is suggested.

Typical Price is just one of many studies that Archaide automates. For a full list of strategies and studies available click here.

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