Technical AnalysisBeginner

Moving Average

The average closing price over the last N sessions, recalculated each day.

Detailed explanation

A moving average smooths out daily noise so the underlying trend is visible. A simple moving average weights every session equally; an exponential one weights recent sessions more, so it reacts faster. It is a lagging indicator by construction.

Formula

SMA(n) = (Sum of last n closing prices) / n

Example

Five closes of 100, 102, 101, 105 and 107 give a 5-day SMA of 103.

Why it matters

The 50-day and 200-day averages are the most widely watched trend markers, so crossings attract real order flow.

Key points

Lags price — it confirms trends, it does not predict them.
Whipsaws frequently in sideways markets.
Often used as dynamic support or resistance.

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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.