How To Calculate Moving Average in Excel (With Example)

Determining the moving average of a data set with Excel

First, click Microsoft Excel’s Data tab. …
Under the Analysis section, click on Data Analysis. …
From the above list, select Moving Average and click Ok. …
Enter the data range on the Input Range field.

Data analysis is an essential task for any business or project, and one of the most important tools in data analysis is the moving average. A moving average helps to identify trends in data points over time by providing a measure of the average value of different variables over a period of time. Calculating a moving average in Excel is quite simple, but understanding the concept and how to best apply it to your data set can be a bit daunting. In this blog post, we’ll explore how to calculate a moving average in Excel, discuss when it may be most useful, and provide a few tips on why using the moving average can help inform your data analysis.

How To… Calculate Simple Moving Averages in Excel 2010

Reasons to calculate a moving average in Excel

A moving average can be calculated in Excel for the following reasons:

To constantly update average prices

Excel provides a thorough overview of various data points over time, making it a useful tool for calculating and recording moving averages. You can identify upward or downward trends by displaying the moving averages over predetermined time intervals, such as every 15 days, 100 days, or 200 days. These trends can help you make critical perceptions and decisions. Additionally, Excel makes it simpler to identify the ideal timeline for your data uses.

To mitigate data errors associated with short-term fluctuations

Making a moving average also lessens the impact of short-term fluctuations on overall results. Technical analysts, financial analysts, and data specialists can instead base their conclusions on more reliable data and trends. This can mitigate risks associated with outlying data points. Moving averages facilitate more accurate long-term observations and make data smoothing easier.

To detect changes in momentum for a security

Among the main purposes for which analysts examine moving averages is to spot shifts in a security’s momentum They can identify abrupt changes or downward movements by observing patterns in price movement. They might check share prices, for instance, to see if they increase above the 200-day average. If they do, that may indicate a change in price trend, also known as a bullish trend.

What is a moving average?

A moving average is a calculation that uses a series of averages from data subsets within a larger data set. It is also known as a moving mean or a rolling mean. It’s a term that technical analysts, financial analysts, and statisticians use to describe how averages change as more data becomes available. It describes how a data series changes over a predetermined time period. Additionally updated with recent data, the moving average also incorporates data points from predetermined intervals.

Due to the fact that it won’t overly emphasize infrequent outliers or short-term fluctuations, the moving average can be a useful metric for monitoring price trends. Although 200-day moving averages are frequently used in stock trading, short-, medium-, and long-term averages can also be useful metrics to track.

How to calculate moving average in Excel

Here are some actions you can take to calculate a moving average in Excel:

1. Create a time series in Excel

A series of data points arranged chronologically is known as a time series. The sequence typically consists of discrete-time data from subsequent, evenly spaced points in time. Excel allows you to create time series by downloading or entering your data into the application. Include your data or period information, as well as the relevant actual values for the period.

2. Select “Data Analysis”

Find the “Data” tab at the top of your document while your data points and graph are open. Locate the “Data Analysis” selection from within the analysis group. Click on this option to open data analysis options.

3. Choose “Moving Average”

Choose “Moving Average” from the pop-up menu that follows from there. You might have to scroll to locate the option. “Moving Average” is about halfway down the list. Select “OK. “.

4. Select your interval, input and output ranges

You must manually enter the input and output ranges for your data in the following pop-up window. The input is the values. Use a colon to denote the range of actual values. Likely, these are in your 2nd row. Your input selection might look something like: “$B$2:$L$2. “.

Next, choose the interval you want to use. Your interval is the set amount you want to average. For instance, if you select a six-point interval, your average would include the most recent data point as well as the prior five. You can select the time period that best reflects the timeline you want to record. Choose the cell that corresponds to your first interval data point as the output range.

5. Create a graph using the values

Click “OK” after entering all of your criteria to produce a graph of the values. You can make additional graphs to represent more intervals and view them alongside your current data. To accomplish this, just repeat the procedure’s steps. Smaller intervals can more clearly display deviations, while larger intervals can display smoother lines with fewer peaks and valleys.

Example moving average calculation

Here is an illustration of a straightforward moving average calculation to help you better understand what the Excel program is doing:

A technical analyst is looking for the Petes Stays stock’s simple moving average (SMA). The analyst does this by examining the five-day highs, which are as follows: $22 39, $24. 15, $21. 98, $25. 11 and $24. 81. The analyst must add up the highs and divide that sum by the number of values to arrive at a simple average. This is the same way youd calculate any average. Heres how the calculation looks:

($22.39+$24.15+$21.98+$25.11+$24.81)/5=$23.68

The analyst could examine a new set of data to determine the simple moving average for closing prices. Here are some examples of Petes Stays’ closing stock prices: $19 99, $22. 11, $19. 18, $20. 21 and $23. 10. The average closing price over the previous five days can be determined using the same calculation:

($19.99+$22.11+$19.18+$20.21+$23.10)/5=$20.92.

The analyst can compute a moving average over any period using the same method. Moving averages typically cover 20-, 50-, 100-, or 200-day time frames.

Please note that Indeed is not affiliated with any of the businesses mentioned in this article.

FAQ

How do you calculate a moving average?

Investors and traders use a moving average as a technical indicator to determine the direction of a security’s trend. To determine it, add up all the data points for a given time period, then divide that total by the number of time periods. Moving averages help technical traders to generate trading signals.

How do you calculate moving average in Excel 2020?

Calculating a moving average is quite simple in Excel. Create a SUM(), divide by the desired number of values (in this case, two), and then paste that formula down the column. Or use the AVERAGE() function.

Does Excel have moving average?

You can download the Excel file from the following link and practice along with it.

Calculate 7 Day Moving Average.xlsx.
=AVERAGE(C5:C11)
=SUM(C5:C11)/7.
=0.2*C5+0.1*C6+0.1*C7+0.2*C8 +0.3*C9+0.05*C10+0.05*C11.
EMA is calculated as [Recent Value – Last EMA] x (2 / N+1) + Last EMA.
=C5.
=(C6-E5)*(2/8)+E5.

How do you create a 7 day moving average in Excel?