Moving averages are one of the oldest and most popular technical analysis tools. This chapter describes the basic calculation and interpretation of moving averages. Full details on moving averages are provided in Part Two. | OQUIS A REUTERS Company Your shopping cart is empty Purchase Equis Products Online Products Support Events ation Partners Company Search for Technical Analysis from A to Z Preface Acknowledgments Terminology To Learn More PART ONE Introduction to Technical Analysis Technical Analysis Price Fields Charts Support Resistance Trends Moving Averages Indicators Market Indicators Line Studies Periodicity The Time Element Conclusion PART TWO Reference Bibliography About the Author Formula Primer User Groups Educational Products Training Partners Related Link Traders Library Investment Bookstore Technical Analysis from A to Z by Steven B. Achelis MOVING AVERAGES Moving Averages Moving averages are one of the oldest and most popular technical analysis tools. This chapter describes the basic calculation and interpretation of moving averages. Full details on moving averages are provided in Part Two. A moving average is the average price of a security at a given time. When calculating a moving average you specify the time span to calculate the average price . 25 days . A simple moving average is calculated by adding the security s prices for the most recent n time periods and then dividing by n. For example adding the closing prices of a security for most recent 25 days and then dividing by 25. The result is the security s average price over the last 25 days. This calculation is done for each period in the chart. Note that a moving average cannot be calculated until you have n time periods of data. For example you cannot display a 25-day moving average until the 25th day in a chart. Figure 23 shows a 25-day simple moving average of the closing price of Caterpillar. Figure 23 Since the moving average in this chart is the average price of the security over the last 25 days it represents the consensus of investor expectations over the last 25 days. If the security s price is above its moving average it means that investor s current expectations . the current price are higher
