The concept
What it measures: the average closing price over N periods. Calculated by summing recent closes and dividing by N (simple) or weighting recent prices more (exponential).
Why it matters
It smooths noise to show direction.
How markets interpret it
Traders infer direction from slope and whether price is above or below the average. It does NOT tell you where price will go — it lags.
Key takeaways
- MAs smooth and lag.
- Indicators describe past prices. None predicts the future.
Knowledge check
A moving average is…