Learn how an average smooths historical prices and why it naturally reacts late.
What is being averaged
A simple moving average calculates the mean of a selected number of previous prices. Changing the period changes how quickly the line reacts.
A lagging description
The line uses historical data, so it cannot know the next price. It may help describe direction or variability without predicting an outcome.
Practice with two periods
Compare a shorter and longer average on a historical chart. Note when each line turns and how much price movement occurred first.
Journal prompt
Write one fact you observed, one assumption you made and one question that remains unanswered.
Risk reminder
Markets are uncertain and investing can result in loss. Historical information does not guarantee a future outcome.