A moving average smooths choppy price into a single flowing line, revealing the underlying trend. It is the most popular indicator in technical analysis — and the foundation of countless trading strategies.
A moving average (MA) is the average price over a set number of periods, recalculated as new prices arrive, so it “moves” along with the chart. By averaging out the day-to-day noise, it leaves a smooth line that makes the trend obvious: rising line, uptrend; falling line, downtrend.
A Simple Moving Average (SMA) weights every period equally. An Exponential Moving Average (EMA) weights recent prices more heavily, so it reacts faster to new moves. Traders use a fast, responsive EMA for timing and a slow, stable SMA for the bigger trend.
Two MAs dominate the headlines. The 50-day moving average tracks the medium-term trend, and the 200-day tracks the long-term trend; a stock trading above its 200-day is widely considered to be in a long-term uptrend. They also act as dynamic support and resistance.
When a faster MA crosses above a slower one (e.g. the 50-day crossing above the 200-day), it's a bullish golden cross. When it crosses below, it's a bearish death cross. Crossovers are classic, simple trend-change signals — though, like all indicators, they lag and can give false signals in sideways markets.
Watch a trend build: moving averages only make sense once you've felt a trend live. Trade a moving chart and ride the trend in the day trading simulator.
Not advice: educational content only. For authoritative basics see the SEC at investor.gov.
Related: technical analysis basics, support and resistance, and the MACD indicator.
A moving average is the average price over a set number of periods, recalculated as new prices come in. It smooths out the noise and reveals the underlying trend as a single line.
A Simple Moving Average weights all periods equally, while an Exponential Moving Average weights recent prices more, so the EMA reacts faster to new price moves.
The 50-day tracks the medium-term trend and the 200-day tracks the long-term trend. A stock above its 200-day average is generally seen as being in a long-term uptrend.
A golden cross is when a faster moving average crosses above a slower one, a bullish signal. A death cross is the opposite crossover and is considered bearish.