Moving Averages

The moving average is probably the best known, and most versatile, indicator in the analysts tool chest. It can be used with the commodity price of your choice (highs, closes or whatever) and can also be applied to other indicators, helping to smooth out volatility. As the name implies, the Moving Average is the average of a given amount of data. For example, a 14 day average of a futures closing price is calculated by adding the last 14 closes and dividing by 14. The result is noted on a chart. The next day the same calculations are performed with the new result being connected (using a solid or dotted line) to yesterday's. And so forth. Variations of the basic Moving Average are the Weighted moving averages and Exponential moving averages.

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