Option Investor

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Moving Average

Moving averages are one of the simplest and most useful technical indicators available. The basic definition of a moving average is that it is the average price of a security at a specific point in time. The purpose of the moving average is to show a trend over a given time period and display it in a smoothed fashion. The most common time periods are probably 15, 30, and 150 days. Each time span tells a different story and traders use different numbers to suit their individual needs. The shorter time span produces a more sensitive moving average while the longer time span reflects a smoother history.