The Moving Average is one of the most versatile and widely used of all technical indicators.Because the way it is constructed and the fact that it can be si easily quantified and tested. It is the basis for many mechanical trend following systems.It is essentially a trend following device , therefore it only tells us that a trend has begun only after the fact.

To find the 50 day moving average of closing price , the prices of the last 50 days are added up and the total is divided by 50. The term moving is used because only 50 days' prices are used in the calculation . Therefore, the body of the data to be averaged moves forward with each new trading day.

Note that a moving average cannot be calculated until you have "n" time periods of data. For example, you cannot display a 50-day moving average until the 50th day of the chart.

The most commonly used moving averages are the 20, 30, 50, 100, and 200 day averages. Each moving average provides a different interpretation on what the financial instrument's price will do. There really isn't just one "right" time frame. Moving averages with different time spans each tell a different story. The shorter the time span, the more sensitive the moving average will be to price changes. The longer the time span, the less sensitive or the more smoothed the moving average will be. Moving averages are used to emphasize the direction of a trend and smooth out price and volume fluctuations or "noise" that can confuse interpretation.

Here are the types of moving averages on the chart:

• Simple Moving Average (SMA)

• Exponential Moving Average (EMA)

• Smoothed Moving Average (SMMA)

• Linear Weighted Moving Average (LWMA)