Moving Averages: What Are They?
Moving Averages: WhatAre They?
Moving Averages are
technical tools designed to measure the momentum and direction of a trend. The
idea behind their creation is simple. Price action is thought to fluctuate
around the average value over a period of time, and we can expect to be able to
the represent the market's momentum by calculating if the current prices are
above or below the market's average value. But since the total length of the
time period that must be included in the calculation of the average is too
large (are we going to begin in 1980, or the year 2000 while computing our time
series?), we pick the period arbitrarily, and update the average as time
progresses.