Moving Average

Technical Analysis

A moving average is the average of the last set number of closing prices; each new day pushes the oldest one out, so the average "moves" with the price.

It filters out day-to-day noise to show the general direction. The 50-day and 200-day averages are the most watched. Because it is built from past prices it always lags; it shows direction, not the future.

Example

If the last five closes were $10, $11, $12, $13 and $14, the five-day simple moving average is $12. If the next day closes at $15, the $10 drops out and the average rises to $13.

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