FSR - Simple Moving Averages Lesson
Simple Moving Averages
Introduction
As you may have noticed, there is a lot of data to consider when purchasing and selling stocks. The data can be overwhelming when placed in a table, so charts and graphs are created for a more visual approach. Knowing how to read these charts is important, but even more so is how to interpret and extrapolate useful data. Investors want to be able to predict when they should buy and when they should sell stocks. You will have an advantage over other investors if you can read and interpret the stock data!
Smoothing Techniques
Take a look at the following stock value charts. They are really hard to read! The data fluctuates a lot between each value. Investors use what is called a smoothing technique which does exactly that – it smooths out the data so that there are fewer fluctuations. This way, the graph can more easily be interpreted to find patterns and trends.
A simple moving average is a smoothing technique that is used with stock market data. Click through the following interactive activity to learn more. Click on the lines at the bottom.
SMA Calculation Methods
A simple moving average (SMA) can be found by calculating specific averages using the data. There are two ways of doing this. Click on the flip cards to see each method. Click on the arrow on the bottom right to advance the slides in the activity.
In Your Notebook: Please take down important notes, such as formulas, and attempt the practice examples on your own before viewing the solutions!
Using a Spreadsheet Program 📊
Calculating a Simple Moving Average
The following video will show you how to use a spreadsheet program, such as Microsoft Excel, to determine the simple moving average in the last activity.
Simple Moving Averages Practice
Using any method of choice (by hand or by spreadsheet), determine the 5-day simple moving averages. Click on the arrow in the bottom right corner to advance the slides.
Complete the activity below. After you drag your answer into the box, click on the arrow in the bottom right corner to advance to the next problem.
IMAGES CREATED BY GAVS