Moving average

A moving average of a share price is simply the average of the share prices of the last so many days.

To work out a five-day moving average, for example, you add up the prices for the last five days and divide by five. Then each day you update it by dropping the earliest price used for the previous day’s calculation and adding the latest price.

You can then plot a line of the moving average, which you will see smoothes out share price movements, giving you (hopefully) a clearer view of the price trend thanks to the fact that it sorts the serious moves from the background noise.

You can use 5, 10, 100, 20 or any other number of days to make your moving average, depending on your aims – the longer a time period you use, the smoother your line will be. Most chartists will look at a few different moving averages at a time (say 20 day and 100 day) when they’re looking at charts.

MoneyWeek magazine

Latest issue:

Magazine cover
Going bust

What happens when countries default?

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Vote in the MoneyWeek Readers' Choice Awards

Vote for your favourite financial services companies in the inaugural MoneyWeek Awards, and you could win a year's subscription to MoneyWeek magazine. Find out more and vote here.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.