Simple Moving Average


A simple, or arithmetic, moving average is calculated by adding the closing price of the security for a number of time periods (e.g., 10 days) and then dividing this total by the number of time periods. The result is the average price of the security over the time period. Simple moving averages give equal weight to each daily price.

In a 200-Days Moving Average;  n = 200

The moving average is probably the best known, and most versatile, indicator in the analysts tool chest. It can be used with the price of your choice (highs, closes or whatever) and can also be applied to other indicators, helping to smooth out volatility. Chart FX FE is able to calculate simple moving averages and there are objects for most used simple moving averages such as 10-Days, 50-Days and 200-Days.

Because a Moving average is a Price Indicator it is displayed in the same area where the prices (hi-lo-close or candlestick chart) is displayed, as depicted in the following figure:

SimpleMA.jpg (45236 bytes)