moving average business definition

A series of successive averages of a defined number of variables. As each new variable is included in calculating the average, the last variable of the series is deleted. For example, suppose a stock's price at the end of each of the last six months is $40, $44, $50, $48, $50, and $52. The four-month moving average in the fifth month is: ^{($44 + $50 + $48 + $50)}/₄ , or $48. At the end of the sixth month, the four-month moving average is ^{($50 + $48 + $50 + $52)}/₄ , or $50. Analysts sometimes use moving averages to discover trends in stock prices.