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A centered moving average is very similar to a simple moving average, except for the centered average plots the first point at the center bar of the specified period, not the last bar.
For example: The first point on a three-period centered average would be on period 2, where a simple moving average would have its first point plotted in the third period. If the number of periods is an even number the first point is plotted just to the right of the center bar or period.
Like all moving averages, the drawback is that they are lagging indicators due to the fact that they are based on previous data. The stock can move sharply before it can show the trend changing. A shorter-term moving average has less time lag than a longer one.
The centered moving average can help identify trend direction, signal potential short-term trend changes or pullbacks, and provide dynamic support or resistance.
