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Moving Average

What is a Moving Average?

It is a technical tool that smooths out daily sharp price spikes to show you the stock's actual direction. You take the closing prices of the last 50 days (or 200 days) and calculate the average. As a new day passes, the oldest price drops off, and the newest one is added, so the line continually updates on your chart. If a stock is trading comfortably above its 200-day moving average, traders consider it a strong bullish signal. If it crashes below that line, people usually start dumping their holdings.

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