Technical Analysis

Moving Averages


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.


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.


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.


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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