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Finance: What are moving averages? 7 Views
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Description:
What are moving averages? Moving averages are calculated using past stock prices in an attempt to determine future trends. It’s calculated by averaging closing prices for a specified period of time.
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Transcript
- 00:00
Finance a la shmoop... what are moving averages? ooh I need another tissue that [Girl crying]
- 00:09
average I just can't get enough so moving okay yeah yeah that's not at all
- 00:13
what this term is about here's a chart here's a set of trailing averages 50-day
- 00:18
the blue line they're hundred-day the black line and 200-day the green line
- 00:22
there... note that we say trailing average why trailing? well people we lost our
Full Transcript
- 00:29
crystal ball yeah Warren we know you took it [Warren Buffett eating dinner]
- 00:31
so averages for normal humans can only be trailing because trailing stockticker
- 00:37
closing prices give us data we can actually use stock averages don't take
- 00:42
future data that we're merely guessing at on their charts... only
- 00:46
real numbers that we can actually point to so here's the 50-day average for [50-day average for coca cola stock]
- 00:50
coca-cola stock KO in 2012 and if we move forward a year and change well here
- 00:56
it's a 50-day average right there looks a little bit different and while the 50
- 01:00
data input elements from its closing price each day vary so the average of
- 01:06
those data points will move and why do moving averages matter well for
- 01:11
fundamental analysts kinds of investors you know the people who care just about [Fundamental analyst people appear]
- 01:14
the cash flow and earnings and margins and revenue growth of companies well
- 01:17
really don't matter but for chartist types of investors that is those who
- 01:22
focus really only about trading trends and shapes and curves and the metrics
- 01:27
behind what patterns of stocks take in the future well, they matter a lot then
- 01:32
in fact the 200-day moving average is generally a kind of Chartist living [Priests in church]
- 01:37
Bible for most Wall Street traders and taking meaning from it is all about
- 01:41
recognizing patterns and then imputing likely future patterns based off of
- 01:46
those shapes for example if you're looking here at the peak of a Head and [Head and shoulders stock price graph]
- 01:51
Shoulders chart, the trailing average of this
- 01:55
say 50-day set here of data points is the line about here but if you move
- 02:01
forward and look at the back half well then the moving average is about here [Moving average lines moves]
- 02:06
and if you consider the entire chart well it's about here and the lines are
- 02:10
there in theory to give color as to what direction the
- 02:13
market or this given stock is heading and yep sometimes it works and sometimes
- 02:18
it doesn't [Man eating dinner with Warren Buffett]
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