This process can be accomplished graphically, by hand, if desired. Connecting these averaged points with a line produces a smoother curve than the original data. In practice, the averaged values are not assigned to the midpoint of each period but to the later time to the right for each period. This results in the average lagging the data by half the period for a two-point average. The smoothed values are located at the midpoint of a line connecting each pair of data points.
Identification requires separating meaningful signals from noise.
The answer often depends on a trader's frame of reference. Recursive smoothing is successively applied to OEX data and each smoothed curve plotted. The color plots are contiguous and appear as a continuous spectral color change. Figure 2 shows an example of this. Here, daily OEX closing data and the progressive averages are plotted.