Pro lessonTechnical Indicators · 1/43 min read
Moving averages: SMA and EMA
How simple and exponential moving averages are calculated, with a worked 5-day SMA example, and why every moving average lags the price.
A technical indicator is a calculation based on past price, and sometimes volume, that is drawn on or below a chart. The most basic and widely used one is the moving average.
A simple moving average adds up the closing prices of the last N periods and divides by N. Each new period, the oldest price drops out and the newest one comes in, so the average "moves" along the chart. The result is a smoother line that filters out some day-to-day noise.
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