Moving Average (MA)

Moving Average (MA)

A moving average trend line is a smoothed representation of the price of a financial instrument. A simple moving average is derived by dividing the sum of the prices of an instrument over a given period of time by the number of prices in the series. An exponential moving average takes the same broad approach but assigns weights to each data point. More recent data is given a higher weight than older data and therefore has a greater influence on the smoothing process. Traders use moving averages as technical signals, using anything from a hours-long moving average to a 200-day moving average. A price above the moving average is a buy signal etc.

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