Moving Averages

A moving average (MA) is a commonly used technical analysis indicator in technical analysis.

It is very important to realize that the moving average is a lagging indicator, not a leading indicator< because it is based on past stock prices.

Types Of Moving Averages

There are 2 basic types of moving averages, Simple and Exponential.

A Simple Moving Average (SMA) uses a simple average of stock prices over a defined time span.

An Exponential Moving Average (EMA) is weighted more heavily on recent stock prices over a defined time span.

Moving Averages Length

A moving average can be set for very short time periods even down to a minute.

For most long-term investors, it is very common to use 2 moving averages, the 50-day moving average and the 200-day moving average.

How To Use Moving Averages

There are 2 common ways to use moving averages.

To identify the trend direction

To determine support and resistance levels.

When Moving Averages Collide

Below are a few stocks that have the 2 moving averages very close to each other or possibly intersecting.

This can be a very telling signal.