Moving average definition

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Moving average has a particular significance in relation to IG's platform. Here, we define moving average in general investing and explain what it means to you when trading with IG Bank.

A moving average (often shortened to MA) is a common indicator in technical analysis, used to examine price movements of assets while lessening the impact of random price spikes.

A moving average aids in analysing previous movements of stocks, and is only based on past prices. While it can be of use in other predictive forms of analysis, it is primarily a lagging indicator.

This is because calculating an MA requires a certain amount of data, depending on the length of the moving average. A ten-day MA will require ten days of data, a one-year MA will require 365. 200 day is a very commonly used MA.

Often, traders will use moving average to determine levels of support and resistance.

There are two main forms of moving average: simple moving average and exponential moving average. Simple moving average (SMA) is a straight calculation of average prices for a set number of time periods. Exponential moving average gives more importance to recent prices.

With IG Bank

Our charts feature moving averages, as well as other technical tools like Bollinger bands and RSI, to help traders with technical analysis. To use them, click the ‘technical’ tab at the top of the chart.

Visit our education section

Learn more about technical analysis.

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