![]() ![]() There are numerous methods to calculate a moving average, and quite possibly, you may get varying results with each of the methods. Instead, it will consider the new data points for the calculation of the 5-day moving average.Īccordingly, the 5-day moving average will now be 104.6. ![]() Now, when we move on to the next week, and the price data for the first two days of the following week is available, which we assume is 105, and 100, then the 5-day moving average indicator will automatically ignore the first 2 data points of the first week, i.e., 100, and 102. This leaves us with a 5-day moving average of 104. Suppose Stock V Ltd’s closing price for five days of a week is 100, 102, 108, 106, and 104, respectively. Look at the below example to understand better. It is called ‘moving’ average because it is constantly re-assesses as new data points are found. Note that it is a lagging indicator as it uses past information of the security. Moving average is a technical tool that can help access support and resistance levels for traders who need to regularly plan their entry and exit from various assets like stocks and commodities. Thus, the moving average primarily ensures that it smooths out the otherwise fluctuating price of securities over a time period. ![]() It picks up the price for any underlying security across several data points and averages them to arrive at a median price. ![]()
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