Skip to content

CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Moving average (MA) definition

What is a moving average (MA) ?

A moving average (MA) is a technical indicator that combines price points of an instrument over a specified time frame, and divides by the number of data points, to give you a single trend line. It is popular amongst traders because it can help to determine the direction of the current trend, while lessening the impact of random price spikes.

A moving average will enable you to examine the levels of support and resistance, by analysing the previous movement of an asset’s price. It is a measure of change that trails the previous price action of an asset, assessing the history of market movements to determine possible future patterns. A moving average is primarily a lagging indicator, which makes it one of the most popular tools for technical analysis.

Calculating an MA requires a certain amount of data, which can be a large quantity depending on the length of the moving average. For instance, a ten-day MA will require ten days of data, while a one-year MA will require 365 days’ worth. A 200-day period is a very commonly used timeframe for MA.

The indicator is described as ‘moving’ because the introduction of new figures will replace old data points and ‘move’ the line on the chart.

Discover our online trading platform

Examples of a moving average

There are two main forms of moving average: simple moving average and exponential moving average.

  • A simple moving average (SMA): is the most basic MA, which is just a straight calculation of the mean price of a set of values over a given time periods. If you were to calculate the SMA for a ten-day period, you would take the values of the last ten days and divide the result by ten. Let’s say that the last ten data points of an asset were: 80, 81, 81, 82, 80, 82, 89, 82, 82 and 83. The moving average would add these figures together and divide by ten, resulting in an average of 82.2.

  • The second type of MA is an exponential moving average: which gives more importance to recent prices to make the data more responsive to new information. Most trading platforms will do the calculations for moving averages automatically. With IG, you can access moving averages on our charts, as well as other technical tools like Bollinger bands and RSI. To use them, all you need to do is click the ‘indicators’ icon at the top of the chart and select moving average.

Learn more about moving average strategy:

Build your trading knowledge

Discover how to trade with IG Academy, using our series of interactive courses, webinars and seminars.

A - B - C - D - E - F - G - H - I - L - M - N - O - P - R - S - T - U - V - W - Y

See all glossary trading terms

Help and support

Get answers about your account or our services.

Get answers

Or contact us on +971 (0) 4 559 2104 or helpdesk.ae@ig.com.

Our office is open 5 days a week, Monday to Friday from 8am to 7pm (Dubai time). Support line is available 24hrs a day, 7 days a week, except for Saturday from 1am to 11am (Dubai time).