Moving averages are in the news thanks to the Corona virus. They takes the major fluctuations out of data that might otherwise jump around a lot. The following graph shows this. There are fluctuations during the week because of the nature of the work week. I'm not exactly sure why, but maybe Mondays usually show more positive cases than Fridays. The following graph shows this situation in Georgia, but I think this kind of thing can be found in pretty much any state. And after that is some information from Investopedia.
Understanding Moving Average (MA)
Moving average is a simple, technical analysis tool. Moving averages are usually calculated to identify the trend direction of a stock or to determine its support and resistance levels. It is a trend-following, or lagging, indicator because it is based on past prices.
The longer the time period for the moving average, the greater the lag. The 50-day and 200-day moving average figures for stocks are widely followed by investors and traders and are considered to be important trading signals.
Moving averages are a totally customizable indicator, which means that an investor can freely choose whatever time frame they want when calculating an average. The most common time periods used in MA's are 15, 20, 30, 50, 100, and 200 days. The longer the time span, the less sensitive the average will be.
There is no correct time frame to use when setting up your MA's. The best way to figure out which one works best for you is to experiment with a number of different time periods until you find one that fits your strategy.
Moving averages, a.k.a. running or rolling averages, that I've see, usually use 3 or 7 data points at at time. I had no idea as many as 200 were ever used.
I randomly picked a baseball player from the past and found his number of home runs each season. Incidentally, I once heard a baseball stat man say it would take about three seasons to get an accurate picture of how good a batter is. Now that I think about it, that makes sense, At about 500 at-bats a season, that would be 1,500 at-bats total. I saw on-line that the Pew Research center will typically survey 1,500 people at a time.
Anyway - here are Mickey Mantle's home run totals each season. Then a rolling average, three years at a time, then five years at a time. Notice, it gets a little less bumpy each time.
13, 23, 21, 27, 37, 52, 34, 42, 31, 40, 54, 30, 15, 35, 19, 23, 22, 18
19, 24, 28, 39, 41, 43, 36, 38, 42, 41, 33, 27, 23, 26, 21, 21
24, 34, 34, 38, 39, 40, 40, 39, 34, 35, 31, 24, 23, 23
