A 30 day moving average is a window on what is happening to the stock over the last few weeks. For every day, we look back 30 days and add up the closing price for that stock. We then divide by 30 to get an average price.

Average price = Sum of the last 30 trading days / 30

We call it a moving average because that 30 day window moves forward day by day. For tomorrow we will remove day 1 of our calculation we just did and add in day 31. The next day we will remove day 2 from the first calculation and add in day 32 and so forth.

On the graph, this is seen as a red line. For each day that we calculate the 30 day moving average, we draw a red dot. The line is joining these dots together.

When the price is greater than the 30 day moving average, then the price is stronger than what it has been on average for the last month, and is normally in an uptrend. This can be seen below on the right of the chart.

When the price is less than the 30 day moving average, then the price is weaker than what it has been on average for the last month, and is normally in a downtrend. The chart above displays this through the middle section.

The direction of the 30 day moving average is also a useful summary to the trend direction.

Consider the chart below. It is difficult to decide which way it is trending.

Looking at this chart you would not know what the overall trend is doing? The price is coming down a few cents then going back up, but is that significant? Is it really trending down? Is it trending sideways? From just a few days we can't tell. We need to look at a longer time period to get a clearer picture.

When we overlay the 30 DMA we can see that the stock is actually in a downtrend.