A moving average is one of the most basic technical indicators used to analyze stocks. “Moving average” is a broad term and there are many variations used by analysts to smooth out price data and analyze trends.

Moving averages will require a time period for calculations. For example, an investor may choose a 50-day moving average, where the past 50 days in the data will be used to calculate the average. Smaller windows of time are more sensitive to changes in the price data due to the fewer number of data points and larger time periods are less sensitive to daily changes.

How are moving averages used?

Moving averages may be used by traders as their main strategy or as a part of their trading strategy. The most popular and simple way to use moving averages is to use a cross over strategy which, if followed, will hopefully tell a trader when to buy and sell. This strategy will be discussed further.

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