Moving Average
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Moving Averages & Exponents
Everyone knows that if you want to smooth something out you use an average. That’s what they’re all about, getting rid of the highs and lows so you can get a better look at the middle. Averages are great for seeing trends, because they cut out excess noise, but they run into the problem that because each one is made up of multiple data points you end up with fewer points to work with.
This is where the Simple Moving Average or SMA comes in.
What it does is take an average from a rolling period and use that, so you end up with the same number of data points as you had in the original chart, but the line is smoother.
Here’s an example from one of our previous charts.