Moving average = sum of the closing prices over the most recent n days ÷ n
What the Indicator Shows
A moving average smooths out the small fluctuations in day-to-day price movement, making it easier to grasp the broad direction (trend) of a stock. Depending on the number of days used, the line can be classified as short-, medium-, or long-term, and it is common to display several different periods together for comparison.
How to Read It, and What to Watch Out For
Some view the price trading above its moving average as an upward bias and below it as a downward bias, but this is not an absolute criterion. Because a moving average is calculated from past prices, it also tends to lag behind sudden shifts in the market — a characteristic worth keeping in mind.