A rolling average of price that smooths short-term fluctuations and helps describe trend direction.
How it works
A moving average recalculates the mean price over a rolling window. Shorter windows react faster; longer windows smooth more noise. Traders use the slope and price relationship descriptively, not as proof of a future move.
Example
A 20-session simple moving average adds the latest 20 closes and divides by 20, dropping the oldest close each session.
Limitations
It is a lagging measure and can generate repeated false signals in sideways markets. Window choice materially changes the reading.
Evidence LedgerHow this insight was built
Human reviewedThesis being tested
This definition explains Moving Average accurately, with its practical use and material limitations.
Key assumptions
- The named calculation or convention is stated where definitions vary.
- The example is illustrative and not a forecast or recommendation.
What could invalidate the view
- A different market, instrument, jurisdiction, or methodology may use the term differently.
- The cited authority may revise its guidance or terminology.
- Editorial ownership
- Market Master · reviewed
- Approval state
- Reviewed financial content
- Evidence currency
- Current evidence window
- Source coverage
- 2 documented sources
Sources used for this insight