Moving Averages
Moving averages are lines that show the average price of a stock over a specific period of time. These lines smooth out the price data, making it easier to see the overall trend.
For example, if you look at a 50 ma (moving average) on a daily chart, it adds up the closing prices of the last 50 days and divides by 50. Each day, the oldest price drops out, and the newest price is added, so the line “moves” forward over time.
There are two main types of moving averages:
Simple Moving Average (sma or ma): This takes the straightforward average of the prices over the selected period.
Exponential Moving Average (ema): This gives more weight to recent prices, making it more responsive to current market changes.
Traders use a combination of these moving averages. Everyone is different, the ones I use on the daily chart and intraday chart are shown on the two examples. Click on the images and zoom in on the top left to see moving average description and color code. Reference the time scale to see if it is the daily or intraday chart.
