•Moving Average or Moving Mean is defined in Wikipedia as a: ‘Calculation to analyse data points by creating a series of averages of different subsets of the full data set.’
•Wordnik defines MA as: ‘One of a family of techniques used to analyze time series data, in which a weighted average is determined for a given data point based on its value and the past values.’
•Simply put, take the first set of data points e.g. 3 or 4, add them together and divide the sum by the count of data points used e.g. 3 or 4 (as seen in the example).
•The example shows a Simple Moving Average (SMA) which is the simplest, but powerful indicator.
•SMA helps in removing fluctuations from the data when it swings up and down over the short term.
•It is used to help in smoothing out a, otherwise volatile, set of data to reveal an underlying trend and allows for better analysis of long-term direction.
•Although quite easy to calculate, it does require a number of data points to begin using SMA.