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Definition

An average of the most recent prices of a share progressed each trading day such that the same number of days remain in the average. The moving average (MA) is the most commonly-used technical indicator in the world and is often used in conjunction with other indicators. To calculate a simple moving average on a data stream (such as a series of daily share prices), simply add up the prices in the period which you have chosen and then divide by the number of days to get an average. That average is then plotted on the same day as the most recent price. The shorter the period the more sensitive the signals. Moving averages smooth out the "noise" in the chart to reveal the underlying direction. Here is an example of a simple 150-day moving average on the share ArcelorMittal (ACL):
<img src="http://www.pdsnet.co.za/onlinecourse/images/Moving_Average__ACLgloss.png" />
<figure class="container-fluid">
<figcaption style="text-align: center;">Moving Average Example</figcaption>
</figure>
The general rule is that where the price chart cuts up through the moving average, that is a buy signal and where it cuts down that gives a sell signal. As you can see from the chart above, ACL shares broke above their 150-day simple moving average on 18th November 2020 at 51c. Later the share broke down through that same moving average on 29th April 2022 at 813c - giving a massive profit. You will notice that ACL is still falling - so investors should wait patiently until it breaks up again through the 150-day MA. Sometimes a share does not move in a broad sweeping trends like that shown above, but instead moves up and down in a "sideways" market. Moving averages do not give good signals in a sideways market but cause the investor to have to buy and sell continuously at more or less the same price and so incur dealing costs. There are many different types of moving averages. Your software gives six options - the simple, exponential, triangular, time series, linear weighted and variable. To add a moving average to your chart simply press the right mouse button and select "moving averages".

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