Moving average

Moving average is a technical indicator to identify the trend and to generate buy and sell signals. A moving average can be calculated for different periods of time, a moving average can be calculated for 10 days, 20 days or 200 days for example.

Moving average: the sum of share price quotations for x number of days / x number of days

A moving average that is calculated for more days than another moving average is less sensitive to the stock price change on each new day. A moving average is recalculated every day, a new share price is added and the oldest share price are removed from the calculation.

Moving averages can be used to generate buy and sell signals. If one calculates a longer moving average and a shorter moving average, a buy signal or sell signal is triggered when the shorter moving average cuts through the longer moving average. The trend can be identified by the direction of the moving average.