Simple Moving Average

What is the definition of Simple Moving Average?

A simple moving average is basic arithmetic mean (average) price over the previous N periods in a share price chart. The period used can be minutes, days, weeks etc. Generally the moving average is plotted as a line on a chart alongside the share price in order to show the general/overall trend in the price. It tends to appear much smoother than a daily price chart thus highlighting trends more deftly.

Stockopedia explains Simple Moving Average...

Many investors use 200 day Moving Averages and 50 day Moving averages extensively. When a 200 day moving average is rising the trend is seen to be up, and when falling, the trend seen to be down.

Moving Average

Some investors will sell a share if it falls below a 200 day Moving average or buy as it rises above. Indeed these rules have been used by trend followers extensively and successfully for decades. The tighter a moving average is the more frequently the share price will cut through the chart. (e.g. 10day).

Moving Averages Ratios

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