A simple, or arithmetic, moving average is calculated by adding the closing price of the security for a number of time periods (e.g., 12 days) and then dividing this total by the number of time periods. The result is the average price of the security over the time period. Simple moving averages give equal weight to each daily price.

For example, to calculate a 21-day moving average of IBM: First, you would add IBM's closing prices for the most recent 21 days. Next, you would divide that sum by 21; this would give you the average price of IBM over the preceding 21 days. You would plot this average price on the chart. You would perform the same calculation tomorrow: add up the previous 21 days' closing prices, divide by 21, and plot the resulting figure on the chart.

where