Moving Average
a.k.a. MA
The average price over a set number of recent candles, drawn as a smooth line that follows the price.
A moving average (MA) takes the last so-many prices, averages them, and plots the result. Each new candle, the oldest price drops off and the newest joins, so the line slides along with the chart. It turns a jagged, twitchy price into a calm curve, like looking at a coastline from a plane instead of the beach.
Traders use it to read direction (price above a rising MA is a rough sign of an uptrend), to find dynamic support and resistance, and to time trades with crossovers. Common flavours are the simple, exponential and weighted versions. All of them lag, because they are built from the past.
A 5-period simple moving average
- The last five closes are 1.1010, 1.1030, 1.1020, 1.1050 and 1.1040.
- Add them up: 5.5150.
- Divide by 5: 1.1030.
Bottom line: The 5-period MA sits at 1.1030. Tomorrow the oldest close drops out and the new one comes in.
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