Trend Analysis by Using Simple Moving Average

In technical analysis, traders use various indicators to help make buy and sell decisions. One such indicator is the moving average, which helps smooth out daily price movements to help establish a trend in price by creating a constantly updated average price. By calculating the moving average, the impacts of random, short-term fluctuations on the price of a stock over a specified time frame are mitigated. Simple moving averages use a simple arithmetic average of prices over some timespan, which exponential moving averages place greater weight on more recent prices than older ones over the time period. Moving average are calculated to identify the trend direction of a stock or to determine its support and resistance levels. It is a trend-following or lagging indicator because it is based on past prices.