How To Harness The Power of Moving Averages For Your Portfolio

Jonathan Hobbs

4 months ago4:29 mins

How To Harness The Power of Moving Averages For Your Portfolio

Trying to guess where the market might be headed next is no easy feat. But with moving averages, you can cut out a lot of short-term price noise and get a much clearer picture of the overall trend in an asset’s price. So let’s see why moving averages are one of the simplest – and most effective – technical indicators around.

What are moving averages?

As the name suggests, a moving average is a “moving”, or constantly updating, average of the price over a set number of recent investment periods – those can be hours, days, weeks, or even months. Here’s an example of the 200-day simple moving average, or SMA, (blue line) for the S&P 500 (black line). Notice how it’s acted as support for the price (green circles) or resistance (red circles) at different times over the past decade.

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