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.
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 analyzing 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.
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.