Technical Analysis

Moving Averages

1

The concept is based on the idea that an investor can calculate the average stock price across a period of time. As the time passes by, the moving average will change as the price of a stock goes up and down.

2

Technical analysts are tracking the moving average of a stock in hope that the stock price will go above the moving average. The belief is that when this happens, the stocks price will go up.

3

When using moving averages, investors should calculate a moving average that matches their objectives. i.e. If they are a short-term investor, they should calculate a moving average over the shorter term.

4

It is calculated by adding each stock price for each timeframe together and dividing by the number of total stock prices. i.e. ($12 + $14 + $11) ÷ 3 = $12.33. As time passes by, you’d add another stock price.  

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