One of the most popular Overlays is known as the Moving Average line. Moving Averages are used in investing to smooth out the ‘noise’ of short term price volatility to get a more insightful view about how a price is trending over time.
A Simple Moving Average is calculated by taking the daily closing price of a security over a given period, adding those prices up and then dividing by the number of days. As each day passes the entire data set is updated, which is what makes this a ‘moving’ average.
Simple Moving Averages tend to be the preferred choice when calculating long term price trends - but they’re not the only choice. Exponential Moving Averages (EMAs) are calculated in a way that puts extra weight on the most recent price data. EMAs are often used over shorter time scales, notably with the MACD indicator, because they can give more predictive signals about recent price moves.
To add Moving Average overlays: Click the Moving Average option in the menu. By default this will add the 50 Day Moving Average. In the drop-down you’ll see that you have added the MA line to your chart.
You can repeat the process, and add click Moving Average again, to add a 200 Day Moving Average. Importantly, you can add multiple MA lines - and all of them can be customised.
To customise a Moving Average line: Click the Moving Average link at the top right-hand side of the chart (see image above). This will open a modal window where you can adjust the timeframe and toggle between a Simple Moving Average and an Exponential Moving Average. Click Close.
In addition, you can also change the colours of your Moving average lines, by clicking the colour circle in the settings modal.
Once you’ve made your adjustments, the price chart will show your Moving Average lines.