| moving average A series of successive averages of a defined number of variables. As each new variable is included in calculating the average, the last variable of the series is deleted. Suppose a stock's price at the end of each of the last 6 months is $40, $44, $50, $48, $50, and $52. The 4-month moving average in the fifth month is: ($44 + $50 + $48 + $50)/4, or $48. At the end of the sixth month, the 4-month moving average is ($50 + $48 + $50 + $52)/4, or $50. Technical analysts frequently use moving averages to discover trends in stock prices. See also 200-day moving average. |
Moving average. A moving average of securities prices is an average that is recomputed regularly by adding the most recent price and dropping the oldest one.
For example, if you looked at a 365-day moving average on the morning of June 30, the most recent price would be for June 29, and the oldest one would be for June 30 of the previous year.
The next day, the most recent price would be for June 30, and the oldest one for the previous July 1.
Investors may use the moving average of an individual security over a shorter period, such as 5, 10, or 30 days, to determine a good time to buy or sell that security.
For example, you might decide that a stock that is trading above its 10-day moving average is a good buy or that it's time to sell when a stock is trading below its 10-day moving average. The longer the time span, the less volatile the average will be.
What Does Moving Average (MA) Mean?
An indicator used in technical analysis that shows the average value of the price of a security over a set period. Moving averages generally are used to measure momentum and define areas of possible support and resistance.
Investopedia explains Moving Average (MA)
Moving averages are used to emphasize the direction of a trend and smooth out price and volume fluctuations, or “noise,” that can cloud the analysis of a stock's price movement. Typically, upward momentum is confirmed when a short-term average (e.g.,15-day) crosses above a longer-term average (e.g., 50-day). Downward momentum is confirmed when a short-term average crosses below a long-term average.
Related Terms:
• Moving Average Convergence Divergence—MACD
• Resistance
• Simple Moving Average—SMA
• Support
• Technical Analysis
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