7.16What is a moving average?
1What is it?
A moving average (MA) is the average closing price over the last N periods, recalculated each day, making a smooth line.
2Why does it exist?
It filters out daily noise to show the trend. Price above a rising MA = uptrend.
3Diagram
10-day SMA30-day SMA
4Calculation
SMA(5) = (C1 + C2 + C3 + C4 + C5) ÷ 5
- Closes: ₹100, ₹102, ₹101, ₹104, ₹103
- Sum = ₹510; ÷ 5 = ₹102
5-day SMA = ₹102.
5Quick revision
- MA = average price over N periods.
- SMA = simple; EMA = gives more weight to recent prices.
- Shows trend; lags price.
6Knowledge check
Q1. Closes ₹10, ₹12, ₹14. 3-day SMA?Show answer
₹12.
Q2. EMA vs SMA?Show answer
EMA weights recent prices more.
Q3. Price above a rising MA suggests?Show answer
An uptrend.