A moving average calculates the average price over a rolling number of periods. As each new period is added, the oldest period is removed, which creates a smoother line than the original price series.
Common uses
Traders use moving averages to study trend direction, dynamic support or resistance, and possible crossovers. Shorter averages react faster; longer averages move more slowly.
Limitations
Moving averages are based on past prices and lag the market. The period and type should match the instrument and time frame being studied.