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What Is a Moving Average

A moving average is the average of the last few closes, worked out again after every close, so it follows the price but smooths it. This paper shows you gold's ten-day line drawn from real daily bars, the idea as a rolling pin flattening lumpy dough, the line on the daily chart, the window of ten days that slides along one day at a time with the arithmetic of one slide, and the Period field that sets the window on your platform.

Difficulty
Beginner
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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The closes, and their average

A moving average is the average of the last few closes, worked out again after every close. Each dot in the drawing is one of gold's daily closes from February to April 2025; the blue line is the average of the last ten of them, redone every day. It follows the dots but smooths them. On 14 March the close was 2987.53 and the average of the last ten closes was 2926.38, so the line sat there while the dot was above it. The gap between dot and line is the whole of what the line says: where the price is, against where it has been for ten days.

A rolling pin

The picture is a rolling pin on dough. In front of the pin the dough is lumpy: the daily closes, up one day and down the next. Behind it the dough is a smooth sheet, and that sheet is the moving average. The pin rolls over a few days at a time, so a lump only counts while it is under the pin, and then it is rolled out. The line follows the dough. It only smooths what the dough already did, and it cannot know what the next lump will be.

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