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Moving average definition
A moving average is a technical indicator that averages an instrument's price over a set number of periods and plots the result as a single line. It smooths price data so the underlying trend is easier to read.
It is called moving because the average recalculates as each new period closes and the oldest one drops out. Traders read it for trend direction and for areas where price may react as dynamic support or resistance.
The two common types differ in weighting. A simple moving average gives every period equal weight, while an exponential moving average weights recent prices more heavily, so it reacts faster to a turn in price.
Moving average Example
You apply a 50-period moving average to a EUR/USD chart.
While price holds above the line and the line slopes up, you can read the market as being in an uptrend.
If price drops below the line and it starts to turn down, you may treat that as an early bearish signal.
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