Moving Averages
A moving average is the average price of a stock or market over a defined period. In the stock market, a 200-day moving average is used to determine long-term trends. It smoothes out the short-term wiggles to help make the trend more clear. Short averages are used to measure or smooth shorter-term trends.
The term “moving” comes from the calculation of the average. For a daily average, each day’s value is calculated from a moving window of days going back in time. Each successive day’s average is calculated from a successive range of daily data.
This is covered in more detail in Chapter 8, “See the Forest and the Trees.”
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